FX.co ★ Trading plan for the EUR/USD pair for the week of March 22-26. New COT (Commitments of Traders) report. A total flat, despite important events and the Fed meeting

EUR/USD - 24H.

The EUR/USD currency pair rolled back from its local lows, however, it did not manage to go far up at the end of this week. It couldn't even work out the critical Kijun-sen line. Therefore, despite our expectations of a new round of the global upward trend in 2021, it should be stated that the downward trend persists on the 24-hour timeframe. So, whatever the fundamental hypotheses and expectations, it is still recommended to consider short positions. Or trade based on the fact that the trend is now descending. It is clear that on the lower timeframes, more short-term upward trends can be formed, which can also be worked out. However, back to the 24-hour timeframe. First, it should be noted that the price has already worked out the level of 61.8% on the Fibonacci several times, which was built on the last two-month round of growth of the pair. That is, formally, the downward correction (for the global trend, the movement of the first 2.5 months of 2021 is exactly a correction) can end now. However, if we consider the entire upward trend, which in total has lasted for a year, the price has now adjusted by only 23.6%. Thus, from a technical point of view, the downward movement may continue in the coming months. This forecast is countered only by the fact that a new stimulus package has been approved in America, so an additional $ 2 trillion will flow into the American economy in the near future, which can significantly lower the dollar.

COT report.

During the last reporting week (March 9-15), the EUR/USD pair did not rise or fall by a single point. Although the downward movement is not too strong, market participants continue to actively get rid of contracts for the purchase of the European currency. Look carefully at the illustration above. The green and red lines of the first indicator diverged as much as possible around September last year. Then we said that the upward trend is nearing its end. But instead, thanks to the trillions of dollars poured into the US economy, the US currency continued to fall in value. However, compared to the highs of September, the bulls did not manage to take the pair far up. At the moment, the 2.5-year high is located near the level of 1.2350. And the green and red lines of the indicator, which display the net positions of non-profit and commercial groups of traders, all this time sought to narrow. That is, roughly speaking, in September last year, a downward trend could begin. Now, the green and red lines have accelerated towards each other. In the two weeks leading up to the latest COT report, the Non-commercial group closed 22,000 buy contracts and opened 22,000 sell contracts. This is a very serious change for the most important group of traders. The latest COT report, which was released yesterday, showed that professional traders continued to get rid of purchases of the euro currency during the reporting week and closed another 12 thousand buy contracts. Thus, the mood of the major players became even more "bearish". All this adds up to excellent prospects for a downward trend. We believe that global fundamentals may again have a strong impact on the euro/dollar pair in 2021. It should be understood that the global crisis is not yet over.

This week, there were quite a large number of interesting events. Of course, the Fed meeting and Jerome Powell's speech stand out. However, the Federal Reserve did not make any important decisions and made it clear that no changes in rates should be expected until 2024. As for the quantitative stimulus program, it could begin to wind down in 2021, theoretically. But again, Powell and the company did not give any specific signals about this. In general, the meeting was to a certain extent "passing". Inflation in the European Union did not interest anyone at all, as it remained unchanged at 0.9% y/y. Christine Lagarde's speech was marked by words about the contraction of the European economy in the first quarter of 2021 after it had already contracted in the fourth quarter of 2020. And the most important events concerned the European Union, its possible third "wave" of the epidemic, and the huge problems associated with vaccination of the population. As you can see, there were quite a lot of factors that influenced the movement of the euro/dollar pair, however, the markets failed to compare them all with each other and as a result, the pair has been trading flat for more than a week, between the levels of 50.0% and 61.8% on the Fibonacci 24-hour timeframe.

Trading plan for the week of March 22-26:

1) On the 24-hour timeframe, the whole technical picture is confused. The pair could have started a new round of the upward trend from the 50.0% Fibonacci level that was reached a couple of weeks ago, but instead decided to complicate the correction trend that began earlier this year. Thus, formally, there is now just a downward trend, so it is recommended to consider buy orders not earlier than fixing the price above the critical Kijun-sen line. On the lower timeframes, it is allowed to consider the upward trends earlier.

2) In fact, we can now conclude that a downward trend has begun. However, there are a lot of factors that can now influence the exchange rate formation of the euro/dollar pair, and many of them speak of opposite directions of movement. Thus, it is recommended to trade downwards now, using lower timeframes, because there is a clear trend. But it should be remembered that from a fundamental point of view, the probability of a new and strong fall in the US currency in 2021 remains high.

Explanation of illustrations:

Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.

Ichimoku indicators, Bollinger Bands, MACD.

Support and resistance areas – areas from which the price has repeatedly bounced before.

Indicator 1 on the COT charts – the net position size of each category of traders.

Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.