FX.co ★ Analysis of EUR/USD, March 12. COT report. Euro bulls not discouraged by Lagarde's pessimistic remarks

EUR/USD – 1H.

Hi everyone! The EUR/USD pair closed above the downtrend line on March 11. So, currently, it is trading with a bullish bias. The pair seems to have started an upward movement. The pair is trying to reach the correction level of 76.4% - 1.2021. If the quote closes under the trend line, the US currency is likely to steam up. In this case, the euro/dollar pair may fall to the correction level of 127.2% - 1.1873. Yesterday, the ECB hold a meeting and a bit later the bank revealed its results. As it turned out, the results were rather controversial. The ECB did not make any amendments to its monetary policy. Therefore, there was nothing for traders to react to. Additionally, Christine Lagarde said that the bank would accelerate the PEPP program (an analogue of QE, created after the outbreak of the pandemic as a tool to counter its economic consequences) over the following quarter. The overall size of the PEPP totals €1.85 trillion.

Lagarde also said that the European economy would contract in the first quarter. However, this statement hardly came as a surprise to traders. GDP is expected to decline in the fourth quarter. Yet, investors were anticipating it as quarantine restrictions remained in effect in the first quarter of 2021. So, it would be naive to expect a rebound. "While the overall economic situation is expected to improve over 2021, there remains uncertainty surrounding the near-term economic outlook, relating in particular to the dynamics of the pandemic and the speed of vaccination campaigns. The rebound in global demand and additional fiscal measures are supporting global and euro area activity," Lagarde said. Thus, Christine Lagarde's speech could be called quite pessimistic. The euro showed a slight drop during her speech but most traders remained optimistic and bulls continued to dominate. The euro resumed its growth after turning lower.

EUR/USD – 4H.

On the 4-hour chart, after the formation of a bullish divergence of the CCI indicator, the euro might advance and the pair is likely to grow to the Fibonacci level of 161.8% - 1.2027. However, the possible formation of bearish divergence of the same indicator may signal a reversal of the US currency. If so, the pair may fall to the correctional level of 127.2% - 1.1729. In case the pair closes above the level of 161.8%, it is likely to edge even higher.

EUR/USD – Daily.

On the daily chart, the EUR/USD pair has consolidated under the uptrend line, so the chart shows bearish sentiment. The descending trend line only confirms this fact. If the pair consolidates under the Fibonacci level of 261.8%, it is likely to dip to the correctional level of 200.0% - 1.1566.

EUR/USD – Weekly.

On the weekly chart, the EUR/USD pair has made a consolidation above the narrowing triangle, which indicates the possibility of further growth of the pair in the long term.

News overview:

On March 11, the US economic calendar contained only a report on initial jobless claims, which was almost ignored by traders.

Economic calendar for US and EU:

EU- Industrial Production (10-00 GMT).

US – Consumer Sentiment Index by University of Michigan (15-00 GMT).

On March 12, the EU and the US will not release any significant reports.

COT report (Commitments of traders):

The latest COR report from March 2 turned out to be quite mixed especially after three fairly calm weeks. The number of long contracts, managed by non-commercial traders, decreased by 8,000 while the number of short contracts fell to 8,000. Trading sentiment got more bearish which can be vied in the trajectory of the euro/dollar pair in the past two weeks. Taking into account this information and the daily chart data, the pair is highly likely to drop. However, the report for February 2 also showed discouraging figures, but a few days later, the euro advanced. The number of long contracts still significantly exceeds the number of short contracts.

Outlook for EUR/USD and trading recommendations:

It is recommended to open short trades if the pair closes under the uptrend line with the target at 1.1873 on the 1H chart. Investors can open long traders if the pair rebounds from the lower border of the channel on the 1H chart with the targets at 1.2021 and 1.2063.

Terms

The Non-commercial category includes major market players: banks, hedge funds, investment funds, private, and large investors.

The Commercial category embraces commercial enterprises, firms, banks, corporations, companies that buy currency not to obtain speculative profit, but to ensure current activities or export-import operations.

The category of Non-reportable positions means small traders who do not have a significant impact on the price.