EUR/USD - 24H.
The EUR/USD currency pair continued its downward movement over the past week. At least, the pullback of quotes to the top, which occurred in the middle of the week, can not be classified as a correction. This means that the downward trend persists, and it is still considered a correction in global terms. The illustration clearly shows that at the moment the pair has corrected by 38.2% on the Fibonacci (almost) of the entire upward trend, which began in March last year. Thus, we still insist that at this time, the pair is undergoing a banal technical correction. In a less long-term perspective, it looks like a fairly strong trend and has been going on for more than three months. In general, the picture of the state of things does not change completely. No one will deny that in the case of any trend, corrections are necessary. Thus, the nature of the strengthening of the US currency in the last three months may be extremely technical. Now many analysts and traders conclude that the dollar is growing due to new injections into the economy from Congress, or high vaccination rates in the United States and low in Europe. Although in fact, technical factors can play a dominant role. Or their combination with the fundamental ones. Thus, at this time, the level of 1.1691 (38.2% Fibonacci) plays an important role. If it is overcome, the US dollar may continue to rise for some time. Although, of course, the lower the pair falls, the more likely it is that the whole downward movement will turn into a long-term trend. But in any case, we always recommend trading on the trend, and there are downward trends on the hourly and 4-hour timeframes. As for the global factors, they have even intensified recently, as Joe Biden is going to push through another stimulus package for another $ 2 trillion. This money will again be poured into the economy, further inflating the US money supply.
COT report.
During the last reporting week (March 23-29), the EUR/USD pair fell by 170 points. This is already quite a significant drop and we have been recording it for several weeks in a row. The new COT report was quite eloquent. During the reporting week, a group of Non-commercial traders opened 25 thousand contracts for sale and 34 contracts for purchase. This means that the net position has decreased by another 25 thousand, and the "bullish" mood of the major players continues to weaken. At the moment, the total number of buy contracts opened by professional players is 195.5 thousand, and sell contracts – 136 thousand. Although on January 5, 2021, that is, 3 months ago, the figures were as follows: 226 thousand – 82 thousand. That is, during the three months of the new year, non-profit traders increased more than 50 thousand contracts for sale and closed about 30 thousand contracts for purchase. On the face of the trend change to a downward trend. According to COT reports, we expected the trend to end last September. The illustration above clearly shows why. The red and green lines of the first indicator in September-2020 were as far away from each other as possible, which was the harbinger of a trend reversal. However, the fall in the US currency due to the exorbitant trillions of dollars that poured into the US economy caused a new growth of the European currency, which is again clearly seen in the illustration. The net position of non-commercial traders (the second indicator) has been falling since the same September 2020, and the quotes of the euro currency at the same time continued to grow, and these two facts contradict each other. Thus, the "technique" in global terms and the COT report are now speaking in favor of continuing the downward movement. The key level is 1.1691.
The macroeconomic backdrop was extremely weak this week. There was no single important event that deserved the attention of traders. A few macroeconomic reports were all that traders could turn their attention to. Among the most important events of the week, we can highlight inflation in the European Union, which began to slow down again (the base version), the ADP report, which showed a fairly strong increase in new employees in the private sector, but was ignored by traders, the highest index of business activity in the US ISM manufacturing sector and the strongest Nonfarm Payrolls on Friday. The most interesting thing is that traders completely ignored the NonFarm. On Friday, the dollar rose by 25 points in the second half of the day. Thus, we once again draw the attention of traders that "macroeconomics" and "foundation" in reality may not have any impact on the mood of the markets and the movement of the pair. The NonFarm Payrolls report is one of the most important, and if the market reaction forecast is strongly exceeded by 0, then you should again think about whether the markets are reacting to any statistics at all. From our point of view, 80-90% of the statistics continue to be ignored.
Trading plan for the week of April 5-9:
1) On the 24-hour timeframe, the downward trend persists, so it is recommended to consider buy orders not earlier than fixing the price above the critical Kijun-sen line. At the moment, the key level for the pair's prospects is the level of 1.1691. If the price overcomes it, then the downward movement will continue in the long term. Otherwise, a new upward trend may start. On the lower timeframes, it is allowed to consider the upward trends earlier.
2) The downward trend persists at this time. However, there are a lot of factors that can now affect the exchange rate of the euro/dollar pair. But we still believe that technology comes first. Of course, if you look at the overall fundamental background, it seems to be on the side of the dollar, as the US economy is recovering very quickly. But we believe that the trillions of dollars that are poured into it will provoke a new fall in the US currency. But so far, there are no signs of a trend change.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced before.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.