EUR/USD 5M
The EUR/USD pair was very unusual on Wednesday when compared to the average simple days in the forex market. We previously mentioned that Federal Reserve Chairman Jerome Powell's speech and the summing up of the results of the Fed meeting could provoke an increase in volatility and sharp price reversals. And so it happened. However, the EUR/USD pair was trading in absolute flat before the results were announced. Let's take a closer look at the pair's movement over the last trading day. Overnight trading, as always, went flat. Therefore, there is nothing to discuss here. The pair traded along the 1.1911 extremum level during the European and US trading sessions, rebounding a total of five times! The most interesting thing is that the price never went down by more than 14 points, which did not allow traders to set Stop Loss to breakeven. But at the same time, it did not settle above the 1.1911 level even once, therefore, in any case, traders could not get losses on short positions. There were plenty of opportunities to close the short positions to zero, since by the middle of the day it became clear that the markets were simply waiting for the results of the Fed meeting and did not intend to force events until that moment. However, do not forget that the European Union also published the inflation indicator in the morning (number 1 in the chart), which, however, did not surprise anyone with its value. The main value was 0.9% y/y the base value was 1.1% y/y, which was fully in line with the forecasts. Thus, there was no reaction to this report. The dollar immediately fell by 55 points when the results of the Fed meeting were announced in the evening. It did during the absolutely "passing" results of the meeting, since none of the parameters of monetary policy were changed. The accompanying statement spoke of an increase in economic growth forecasts for 2021, so, rather, one should expect that the dollar would strengthen on this news. But traders, without even waiting for Powell's speech, rushed to sell the dollar. Basically, what Powell said after the pair's upward movement was already insignificant, since the buyers took the pair up another 25 points and went to sleep. In general, we cannot call the market's reaction to the Fed meeting logical.
EUR/USD 1H
We can see a complete flat on the hourly timeframe and one bullish candlestick during the previous day, which reflects the market reaction to the Fed meeting. As a result, the EUR/USD pair settled above the Senkou Span B and Kijun-sen lines, but immediately ran into the extremum level of 1.1991, from which it had already rebounded off, as can be seen in the chart. Therefore, most of the pair's action on Thursday will depend on the ability or inability of the bulls to overcome this level. Also, the Senkou Span B line, which is located nearby, will play an important role. But in fundamental terms, Thursday might be even more important and interesting than yesterday. The fact is that European Central Bank President Christine Lagarde has two speeches scheduled on Thursday, and one by Vice President Luis de Guindos, as well as a speech from Powell. In addition, a report on claims for unemployment benefits will be published. Thus, there are four potentially important speeches at once, to each of which the market can react. We recommend trading with extreme caution, and put Stop Loss at breakeven or leave the market during the speech of one or another high-ranking official. In general, you should trade from important levels and lines that are plotted on the hourly timeframe. The nearest levels are 1.1911 and 1.1974 (Senkou Span B). Signals can be rebounds and when levels and lines are surpassed. Do not forget about placing a Stop Loss order at breakeven if the price moves 15-20 points in the right direction.
COT report
Recall that the EUR/USD pair fell by 200 points during the last reporting week (March 2-8), which is quite a lot for it. However, in general, even with such a fall, the upward trend is still visible to the naked eye. Thus, so far, there is still no need to talk about an unambiguous change in the trend to a downward one on a global scale. Let us remind you that in recent weeks the mood of major market players has become much more bearish, as the total number of buy contracts (longs) decreased by 20,000, and sell contracts (shorts) increased by 30,000. If earlier there was a threefold difference between these figures, now it is already two times with an advantage of the former. In other words, over the past five weeks, professional traders have begun to believe less that the euro's growth will continue. As for the reporting week, the "non-commercial" group of traders continued the trend of the last weeks. Major players closed 14,000 buy contracts and opened 12,000 sell contracts during this week. Thus, the net position for this group of traders increased immediately by 26,000, and the mood of the group became much more bearish. The latest COT reports speak almost unambiguously in favor of the market sentiment changing to a downward one. Indicators also signal a very likely reversal of the previous trend, as the green and red lines of the first indicator continue to move towards each other. From our point of view, only one global factor can prevent this - this is the factor of a new potential growth of the money supply in the United States by $2 trillion.
Explanations for illustrations:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the "non-commercial" group.