On Friday, EUR/USD tried to correct higher but then it retreated once it approached the critical Kijun-sen line. In the absence of influential economic releases, a volatility of 49 pips was not surprising. The only report of the day was the second, final estimate of the consumer price index in Germany, which did not differ significantly from the first. German inflation continues to fall very gradually, which could imply the need for a more significant tightening of monetary policy. Still, European Central Bank officials have been signaling their readiness to pause the rate hike rather than continue raising it. Therefore, the euro did not receive any support on Friday and, in general, does not have much support.
There were no trading signals on Friday. There was a moment when the price approached the critical line within 3 pips. This was up to the traders' discretion. The margin of error was small, and a short position could have been opened, which would have been profitable, although with a volatility of 50 pips, one should not expect high profits. Nevertheless, we will not consider this signal, and there were no other signals during the rest of the day. Since the euro could not consolidate above the Kijun-sen line, there are still no reasons to expect an upward movement.
COT report:On Friday, a new COT report for September 5 was released. Over the last 12 months, COT reports fully corresponded to what is happening in the market. The chart above clearly shows that the net position of major traders (the second indicator) began to grow in September 2022 and at about the same time the euro started rising too. In the last 6-7 months, the net position has not risen but the euro remains at very high levels and is declining rather slowly. At the moment, the net position of non-commercial traders is bullish and remains strong. The euro continues to stay relatively expensive compared to the dollar.
I have already mentioned the fact that a fairly high value of the net position signals the end of an uptrend. This is also confirmed by the first indicator where the red and green lines are very far from each other. Usually, it precedes the end of the trend. During the last reporting week, the number of long positions of the non-commercial group of traders increased by 5,200 and the number of short ones rose by 15,600. The net position decreased by 10,400 contracts. The number of long positions is higher than the number of short ones of non-commercial traders by 136,000. This is a very large gap. Even without COT reports, it is obvious that the euro should decline.
Analysis of EUR/USD 1HOn the 1H chart, EURUSD continues to fall, and there are still no grounds for the pair to rally. The euro may continue its downward movement, which is entirely justified in the medium term. This week, there will be at least two significant events, so we might witness unexpected movements. There's a possibility that the pair may correct higher, which we have been expecting since last week.
On September 11, traders should pay attention to the following key levels: 1.0537, 1.0581, 1.0658-1.0669, 1.0768, 1.0806, 1.0868, 1.0935, 1.1043, 1.1092, as well as the Senkou Span B (1.0855) and Kijun-sen (1.0747) lines. The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. Traders look for signals at rebounds and breakouts. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 15 pips. This will protect against possible losses if the signal turns out to be false.
Today, the calendar is basically empty. Most likely, we should brace ourselves for another low-volatility day.
Description of the chart:Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
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 is the net position size for each category of traders;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.