FX.co ★ Hot forecast and trading signals for EUR/USD on November 3. COT report. Will there be a storm in the market due to US elections, how to trade?

EUR/USD 1H

The euro/dollar pair tried to continue moving down on the hourly timeframe on Monday, November 2, but it came across the support area of 1.1612-1.1624, from which the quotes had already rebounded off. This was the notorious exit from the horizontal channel, afterwards the price returned to it very quickly. Thus, a rebound from this area and this time can provoke an upward movement. We also built a new downward trend line, which has four pivot points at once and is on the verge of breaking. Therefore, the price rebound from 1.1612-1.1624, coupled with breaking the trend line, may indicate a new round of upward movement for the pair. Unfortunately, today a lot will depend on the fundamental background, or rather, on the course of the US elections. Therefore, we can expect increased volatility during the day.

EUR/USD 15M

Both linear regression channels are still directed to the downside on the 15-minute timeframe, which speaks volumes about the current trend on the hourly chart and indicates that there are no signs of starting a tangible upward correction.

COT report

The EUR/USD pair rose quite a bit during the last reporting week (October 20-26). Therefore, we can conclude that professional market participants did not make any extremely large purchases and sales of the European currency. However, the new Commitment of Traders (COT) report showed that non-commercial traders were actively closing Buy-contracts (longs) during the reporting week. In total, 12,000 of them were closed. But professional traders were in no hurry to get rid of Sell-contracts (shorts), having closed only 1,000. Thus, the net position of this group of traders decreased by 11,000 contracts at once. It is possible that the main closing of the Buy-contracts took place at the end of the reporting week, because in the following days a more tangible drop in euro's quotes began. Within its framework, the euro/dollar pair lost about 160 points. We remind you that if the net position decreases, it means that the traders' sentiment becomes more bearish. Thus, so far, our forecast is coming true. In the analysis of previous COT reports, we said that the high around the 1.2000 level could remain as the peak for the entire upward trend. The first indicator and its green line clearly show that non-commercial traders have been cutting back on long deals on the euro for two months now. And non-commercial traders are the most important group of large traders in the foreign exchange market. It is believed that it is the one responsible for driving the market.

The indexes of business activity in the manufacturing sectors for October were published in European countries and the European Union as a whole. It turned out that despite the second wave of the pandemic that had already begun by that time, all business activity indices exceeded their forecasted and previous values. However, this did not come as some kind of surprise, since we have already said that with the new lockdown, the service sector will suffer in the first place. Therefore, to assess the impact of the pandemic and the new lockdown on the economy, we are waiting for data from the service sector. No important publication of macroeconomic reports scheduled in America and the European Union on Tuesday. However, traders would hardly have paid attention to them anyway. Presidential elections will be held in the United States today, and although the results should be expected a little later, nevertheless, many fear that the voting procedure in many cities will be accompanied by riots and clashes between supporters of Biden and Trump. Events like this can trigger a reaction in the foreign exchange market. And, most likely, unfavorable for the US dollar.

We have two trading ideas for November 3:

1) The EUR/USD pair continues to move down. And so buyers are advised to wait for more favorable conditions to open long positions than now. For example, if the price settles above the 1.1691-1.1698 area. In this case, you can open small longs with the targets of the Kijun-sen line (1.1732) and the Senkou Span B line (1.1784). Take Profit in this case can be up to 70 points.

2) Bears are actively trading, but gradually, pulling down the pair. Therefore, sellers are advised to continue to trade down while aiming for support levels of 1.1571 and 1.1496, if the price settles below the 1.1612-1.1624 area. Take Profit in this case can be up to 90 points. When opening any position today, remember that volatility can be very high during the day due to the US elections.

Hot forecast and trading signals for GBP/USD

Explanations for illustrations:

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.