EUR/USD – 1H.
Greetings, dear traders! Yesterday, the euro/dollar pair performed a reversal. So, the greenback advanced versus the euro. The pair fell to the correction level of 161.8% - 1.2166. The rebound of the quote from this level may help the euro rise to the levels of 1.2224 and 1.2275. The closing of the quote under the Fibo level of 161.8% may signal a further drop to the levels of 1.2117 and 1.2068. Yesterday the economic calendar was filled with quite interesting new releases. In particular, the European Union unveiled an inflation report for April. The consumer price index came in at 1.6% as widely expected. Nevertheless, the core consumer price index fell from 0.8% to 0.7%. Notably, core inflation is the change in the costs of goods and services but does not include those from the food and energy sectors. Besides, this indicator is far more important than the first one. No wonder, bulls have already started to retreat from the market. In the second half of the day, the euro advanced again but in the evening the Fed minutes came out, which once again pushed the pair down. No one expected the Fed to start hinting at a possible reduction of the quantitative easing program in the minutes. However, according to the minutes, if the economy continues to recover at the same high pace, then the QE program may be adjusted in the future. Strictly speaking, the Fed did not tell traders anything new. Many investors are well aware that if the US economy continues to expand, sooner or later the Fed will reduce its bond-buying program. Moreover, the Fed did not announce any deadlines, and there were no specific conditions, such as "if the US economy recovers by 10% in 2021, we will begin to reduce the volume of bond repurchases". So traders just saw what they wanted to see. This was enough to support the US dollar's rally.
EUR/USD – 4H.
On the 4H chart, the quote rebounded from the level of 1.2223, a reversal in favor of the US dollar. It started to drop to the ascending trend line. The rebound of the pair from this line will help the euro resume the upward movement to the levels of 1.2223 and 1.2353. Closing below the trend line will lead to bearish sentiment, indicating a strong drop in the quote.
EUR/USD – Daily.
On the daily chart, the euro/dollar pair closed above the level of 161.8% - 1.2027. Therefore, it may reach the correctional level of 200.0% - 1.2356. Importantly, judging by technical signals, the uptrend is now unfolding.
EUR/USD – Weekly.
On the weekly chart, the euro/dollar pair has consolidated above the "narrowing triangle", indicated a possible rise of the pair in the long term.
News overview:
On May 19, the economic calendar for the European Union contained an inflation report and for the US, the minutes of the Federal Reserve. Both of these events affected the movement of the euro/dollar pair.
Economic calendar for US and EU:
EU- ECB President Christine Lagarde will deliver a speech (12-00 UTC).
US – Weekly jobless claims (12-30 UTC).
On May 20, ECB President Christine Lagarde will deliver a speech, which may cause volatility in the market. In the US, there will be no important news releases save for data on weekly jobless claims.
COT report (Commitments of traders):
Last Friday, the COT report was released, which again showed that in the reporting week, speculators actively increased long-contracts. If a week earlier the category of non-commercial traders opened in the same volume long and short contracts, now the number of long contracts totaled 16,908, and the number of short ones came in at 5,319. Thus, the mood of the major players again becomes more bullish, which, in turn, indicates a possible continuation of the upward movement of the euro. Notably, the total number of total positions is bigger for short contracts. However, I remind you that we are more interested in the non-commercial category.
Forecast for EUR/USD and recommendations:
It is recommended to sell the pair when closing below the trend line on the 4H chart with targets of 1.2068 and 1.1990 or when closing below the level of 161.8% - 1.2166 on the 1H chart with targets of 1.2117 and 1.2068. Long positions on the pair may be opened if the pair rebounds from the level of 1.2166 on the hourly chart or from the trend line on the 4H chart with targets of 1.2224 and 1.2275.
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 price.
