Analysis of EUR/USD, 5M.
During the first trading day of the week, the currency pair managed to grow again. Notably, at the end of last week, the pair settled below the ascending trendline, which implied a further decline. However, a breakout of the trendline did not support bears. The European currency resumed its growth at the beginning of the European trading session and rose by more than 100 pips during the day. One might assume that there was some important news or reports during the day but there were none. Data on the US and EU business activity indices could not have provoked such a move. The fact is that it was the second estimate in the eurozone, while, in the US, the figures were released too late. Meanwhile, the news about a cut in oil production by OPEC should have boosted the greenback. Instead, it was the euro that showed a rise. Thus, we saw another illogical day with one more rise in the single currency. However, Monday's trading signals were really good. The intraday trend turned out to be perfect. When there is a trending movement, trading becomes more successful. The first signal was formed around the level of 1.0806, after which the pair added about 100 pips. The pair crossed the area of 1.0860-1.0868, thus allowing traders to close long positions at any reading since there was no sell signal during the day. Therefore, traders earned at least 75 pips.
COT report.
On Friday, a new COT report was issued. In the chart above, we see that the net position of big traders (the second indicator) has been growing since the beginning of September 2022. The European currency started growing also at that time. At present, the net position of non-commercial traders remains bullish and very high as well as the euro, which cannot correct downwards at the moment. We have already mentioned that quite a high reading of the net position points to a possible end of the uptrend. This could be seen on the first indicator where the red and green lines are far from each other. This often precedes the end of a trend. The euro made an attempt to launch a downward correction but it is just a rebound. During the last given period, the number of buy contracts opened by non-commercial traders increased by 7.1K, whereas the number of short orders jumped by 6.9K. As a result, the net position remained almost the same. The number of buy contracts exceeds the number of sell contracts by 145K. Thus, the pair is expected to resume falling.
Analysis of EUR/USD, 1H.
On the hourly timeframe, the pair surpassed the trend line and bounced twice off the 1.0926 level. This is quite enough to expect a strong decline in the pair. That is what we said on Monday. However, that day showed us that all these sell signals meant nothing to traders who were only focused on buying the euro. Formally, the pair may start falling until it exceeds 1.0926. For Tuesday, there are the following important trading levels - 1.0537, 1.0581, 1.0658-1.0669, 1.0762, 1.0806, 1.0868, 1.0926, 1.1033, 1.1137-1.1185, as well as the Senkou Span B (1.0781) and Kijun-sen (1.0860) lines. The Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals.
There are also support and resistance levels, but trading signals are not formed near them. Breakouts and rebounds from these levels could be used as signals. Do not forget to place a stop-loss order at breakeven if the price goes in the right direction by 15 pips.
On April 4, Christine Lagarde will provide a speech, which will become the only important event. She is expected to drop hints about the key rate in May. Curiously, the ECB remains the only central bank out of three that continues to raise the rate by 0.5%
What we see on the trading charts:
Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals.
Yellow lines are trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT charts reflects the net position size of each category of traders.
Indicator 2 on the COT charts reflects the net position size for the non-commercial group.