EUR/USD 5M
The EUR/USD pair was not trading in the best way on Friday. A downward correction could be expected on this day for two reasons. Firstly, the pair has been growing all week. Secondly, strong non-farms in the US were expected on Friday, which were supposed to support the US currency. In practice, this is exactly what happened. However, from our point of view, the correction turned out to be very weak. The euro currency grew by 300 points during the week with virtually no reasons. The dollar rose by 60 points on Friday, when the NonFarm Payrolls report exceeded the forecast value by four times. In addition, immediately after the release of US statistics, the price began to "jump" in different directions, which also did not contribute to profitable trading. It should also be noted that the effect of strong Non-Farms could be blurred by increased unemployment. It has increased to 4%. Anyway, we believe that after the unjustified growth of the euro, the correction could have been stronger. Which allows for the option of its continuation on Monday and Tuesday.
As for trading signals, the first one was very strong and profitable. The price rebounded from the extreme level of 1.1482 at the very beginning of the European trading session, after which it fell to the level of 1.1434. It was at this time that reports on Nonfarm and unemployment were published in America. The price initially settled below 1.1434, but literally after 15 minutes it began to grow. Since the Nonfarm turned out to be strong, it was clearly not necessary to open a long position. Therefore, it was necessary to take profit on short positions. It amounted to about 30 points. Then another sell signal was formed, one could try to work it out, but it did not bring profit, since the downward movement did not continue. A small loss could be made here. But in general, the day still turned out to be profitable.
COT report
The new Commitment of Traders (COT) report, which was released on Friday, showed an increase in bullish sentiment among a group of professional traders ("non-commercial"). As you can see in the chart above, the green line indicating the "non-commercial" net position continues to be above zero, although in fact it has slightly decreased following the results of the last COT report. However, there is nothing to be surprised about, since Thursday, when the European Central Bank summed up the results of the meeting, and traders were being active, did not get into the latest report. Thus, even without data on Wednesday, Thursday and Friday, we see that the major players are slowly starting to buy the euro currency, and do not continue to sell it. The red and green lines of the first indicator were near the zero level for a long time, which signaled the end of the last trend. And the past trend is the downward trend of 2021. Given that market participants completely ignored the fundamental background of last week, we conclude that the time for long positions on the dollar and short positions on the euro has come to an end. The "sharp start" of the euro also speaks in favor of the beginning of a new upward trend. The EU currency has grown almost out of the blue by 300 points in five days. This is how most trends begin. Of course, nothing prevents traders from winning back this injustice in the new week. Still, the pair should be adjusted from time to time, even if the fundamental background does not speak in favor of this. But for now, we consider this scenario to be an alternative scenario.
We recommend to familiarize yourself with:
Overview of the EUR/USD pair. February 7. US Nonfarm provoked the beginning of the correction.
Overview of the GBP/USD pair. February 7. The euro and the pound have the opportunity to balance.
Forecast and trading signals for GBP/USD on February 7. Detailed analysis of the movement of the pair and trading transactions.
EUR/USD 1H
The euro/dollar pair maintains an upward trend on the hourly timeframe, as evidenced by the upward trend line. It is located far enough from the price, so the pair may strive for it on Monday and Tuesday, since we did not see a normal correction on Friday. The Bollinger bands have narrowed and are directed sideways, which indicates the completion of the next round of the upward movement. It also indicates a possible correction. We allocate the following levels for trading on Monday – 1.1274, 1.1360, 1.1434, 1.1482, 1.1507, 1.1534, as well as the Senkou Span B (1.1246) and Kijun-sen (1.1334) lines. The lines of the Ichimoku indicator may change their position during the day, which should be taken into account when searching for trading signals. Signals can be "bounces" and "breakthroughs" of these levels and lines. Do not forget about placing a Stop Loss order at breakeven if the price went in the right direction of 15 points. This will protect you against possible losses if the signal turns out to be false. Not a single important event or publication is planned in the United States and the European Union on February 7. Therefore, today you will have to trade on pure "technique". We believe that volatility will be low, and the movement will be downward. All the most interesting things will happen on Thursday.
Explanations for the chart:
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.