FX.co ★ Forecast for EUR/USD on April 5. COT report. NFP report and weekly jobless data fail to boost USD

EUR/USD – 1H.

Hi everyone! During the last trading day, the euro/dollar pair increased to the upper limit of the downtrend channel. After a rebound, the US reversed downwards and started dropping to the level of 1.1715. If the pair closes above this level, the euro will take the upper hand. It may grow to the level of 1.1820. On Friday, all market participants who did not celebrate Good Friday were anticipating the release of the Non-Farm Payrolls data. In the first half of the day, the economic calendar for the eurozone lacked any important publications. So, the trading activity was predictably rather low. However, in the afternoon, the US labor market and unemployment data were on tap. Economists had expected the Non-Farm Payrolls report to show upbeat results, In March, the US labor market was projected to add 662,000 jobs. The figure turned out to be even higher showing a spike in the labor market by 900,000 created jobs. In my opinion, such a strong report should have become a catalyst for an explosive rise of the US dollar. However, neither this report nor unemployment data somehow pushed the pair higher. The unemployment level fell by 0.2% in March. Additionally, throughout the day, there was very low activity and it was impossible to discern the trend. Thus, one of the most significant macroeconomic reports was almost ignored by traders. Maybe today the situation will change. The US dollar has been climbing for quite a long period of time. Perhaps it looks overbought for investors. So, I think that the pair may consolidate in the downtrend channel. Meanwhile, in the European Union, the third wave of the coronavirus pandemic is raging. Some countries are coping well with the pandemic while others are unable to restrain its spread.

EUR/USD – 4H.

On the 4H chart, the pair fell to the correction level of 127.2% - 1.1729. However, after the rebound from this level, the pair rose to the level of 1.1836. Thus, on the 1H chart, the upward movement of the pair is limited by the descending channel and on the 4H chart, the pair is unable to break below the level of 1.1729 to decline deeper.

EUR/USD – Daily.

On the daily chart, the euro/dollar pair consolidated under the correctional level of 261.8% - 1.1822. Thus, it may continue to decrease to the next Fibo level of 200.0% - 1.1566. The mood of traders remains bearish.

EUR/USD – Weekly.

News review:

On April 2, the economic calendar for the European Union was completely empty. On Friday, apart from weekly jobless claims and NFP data, the US unveiled its wages report, which turned out to be slightly worse than traders' expectations.

Economic calendar for US and EU:

US - ISM Services PMI (14-00 UTC).

On April 5, the euro area will not publish any important reports again. However, market participants will be largely focused on the publication of the ISM Services PMI index.

COT report (Commitments of traders):

Last Friday, another COT report was released. During the reporting week, non-commercial traders (the most important category) opened 34 long contracts and 25,045 short contracts. Thus, even analyzing the behavior of speculators now makes no sense. Everything is clear enough. The mood of large traders continues to remain bearish. It is indicated by the regular increase in the number of short contracts and a decrease in the number of long contracts. Hence, on the daily chart, the pair is likely to continue its downward movement. Notably, the downward may turn out to be quite long. So, the pair is unlikely to drop in the next few weeks by another 300-500 pips. Everything will happen gradually.

Outlook for EUR/USD and recommendations:

It is recommended to open short positions with the targets of 1.1715 and 1.1661 after the pair rebounded from the upper limit of the descending channel on the 1H chart. Lon positions can be opened near the target levels of 1.1820 and 1.1873 if traders manage to close positions above the downtrend channel on the 1H chart.

TERMS:

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

"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy foreign currency, not for speculative profit, but to support current activities or export-import operations.

"Non-reportable positions" - small traders who do not have a significant impact on the pair.