On Monday, EUR/USD continued to correct higher, which started during the previous trading day. Volatility was weak, which is not surprising, given the absence of any macroeconomic and fundamental information. As we expected, the pair could correct higher, but take note that important events and reports are just ahead, and it is difficult to predict the market's reaction to them. Therefore, we acknowledge the correction but remain prepared for any developments. A continued bearish movement is anticipated in the medium term.
No notable trading signals on Monday. The pair edged up all day and reached the area of 1.0747-1.0762. Once it entered this area, it stayed there until the end of the day. Therefore, traders should not have opened any positions yesterday. Today, the situation probably won't be any different given the weak macroeconomic and fundamental background. Market participants are unlikely to take risks ahead of the European Central Bank meeting and the US inflation report.
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, the downtrend persists, and EURUSD doesn't have any reason to start an uptrend. The euro may continue its downward movement, which is logical 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 mentioned last week.
On September 12, 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 (1.0826) and Kijun-sen (1.0726) 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, there are no influential events. Traders may look to the release of the German and EU ZEW Economic Sentiment for some impetus, but they are unlikely to cause movements of more than 20 pips. So it appears that we are in for another low-volatility day with flat movements.
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.