Long-term perspective.
The EUR/USD currency pair has decreased by 200 points during the current week. To be honest, what happened this week does not fit into the current technical picture a bit and at the same time fully corresponds to it. Let's figure it out. As part of a long-term downward trend, the pair has adjusted by 450 points in recent weeks. This is very small, considering that the entire trend is more than 2000 points. On the other hand, was there a correction? Thus, it is possible to resume sales of the euro currency. Further, for the first time in a long time, the ECB specifically stated that rates would rise, and the APP program would end on July 1. "Hawkish" rhetoric? Yes. But for some reason, the euro currency rushed down after the announcement of the results of the regulator's meeting. The readings of the Ichimoku indicator are very important here, which is a trending environment, and even on a 24-hour timeframe, give very strong and accurate signals. And what does the Ichimoku indicator tell us? The fact that the pair once again failed not only to overcome but even to go inside the Ichimoku cloud. This moment shows that the bulls remain extremely weak, and the euro currency has just formally adjusted but is not capable of anything more. How can we not remember the most important fundamental factor here? No matter how hard the ECB tries to tighten monetary policy, it is still far behind the Fed, which in two months may raise its rate to 2%. How can we not recall the main geopolitical factor - the military conflict in Ukraine - which primarily threatens economic losses to Europe itself. How can we not remember that the unprecedented sanctions imposed by the European Union against Russia will play against the European Union itself? Oil prices are rising, gas prices are rising, inflation is rising, the ECB is taking a weak position, and the food crisis, although it will not lead to hunger, will significantly limit the range of goods on the shelves of European stores. This means that food prices will also rise. In the United States, meanwhile, everything is fine (except for inflation), and the military conflict in Eastern Europe affects them insofar as.
COT analysis.
The latest COT reports on the euro currency raised a lot of questions. Recall that in the last few months, they have shown a frank "bullish" mood of professional players, but at the same time, the European currency has been falling all the time. At this time, the situation has not changed. The European currency tried to show growth, but last week it collapsed like a stone. Therefore, we again have a situation in which the mood of the major players is "bullish", but the euro is falling at the same time. During the reporting week, the number of buy contracts decreased by 6.3 thousand, and the number of shorts from the "Non-commercial" group decreased by 4.5 thousand. Thus, the net position decreased by 1.8 thousand contracts per week. The number of buy contracts exceeds the number of sell contracts of non-commercial traders by 50 thousand. The second indicator in the illustration above perfectly shows that the net position has been positive for a long time, and the chart of the pair's movement in the same illustration shows a downward movement. From our point of view, this is because the demand for the US dollar remains much higher than the demand for the euro currency. The "respite" for the euro, which has been observed in recent weeks, did not last long, and the global downward trend remains in force. Therefore, we believe that it is still impossible to rely on the data of COT reports on the euro currency when predicting the future movement of the euro/dollar pair.
Analysis of fundamental events.
During the current week, there was one important event in the European Union - the ECB meeting. If we omit all the unimportant information, the conclusions are as follows: the Central Bank of the European Union has finally begun to look toward raising the rate. Lagarde's hopes that inflation would begin to decline by itself were not justified. Inflation continues to rise, so we need to show at least some actions so that the public and the electorate can see that the regulator is not standing aside, watching the rising prices for everything. However, even 2 rate increases in 2022 will not stop inflation now. We have a great example in the face of the Fed, which raised rates by 0.75%, and inflation in the States has already risen to 8.6% y/y (according to yesterday's report). Thus, to stop inflation, the rate should rise to at least 3-3.5%. America is ready for such a scenario, but the European Union is not. Plus, it is completely unclear how the conflict in Ukraine will continue. Most experts continue to say that it will last at least a year.
Trading plan for the week of June 13-17:
1) On the 24-hour timeframe, the pair stopped just a step away from the minimum for the last 20 years - 1.0340 and has already rushed to it again. Almost all factors still speak in favor of the long-term growth of the US dollar. Traders failed to overcome the Ichimoku cloud, so the upward movement and purchases of the euro currency are still not relevant. It is necessary to wait at least for overcoming the Senkou Span B line and only after that consider buying the euro currency.
2) As for the sales of the euro/dollar pair, they are still more relevant now. The price has consolidated back below the critical line, so we have a new sales signal at our disposal with a target of 1.0172 (127.2% Fibonacci), which is already below 20-year lows.
Explanations of the illustrations:
Price levels of support and resistance (resistance /support), Fibonacci levels - target levels when opening purchases or sales. Take Profit levels can be placed near them;
Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5);
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.