M5 chart of EUR/USD
EUR/USD continued its sluggish decline on Friday. At the end of the day, it was still below the critical line, which provides grounds to expect that the euro will continue to fall to the target Senkou Span B line. So far, there are no grounds to assert that a new downtrend has begun. Some relatively important reports were released on Friday, but the market did not even work them out in a logical sense. For instance, the US services business activity indexes were much weaker than the previous month, falling far below the 50.0 level. But the US dollar was strengthening against the euro at that time. So the reports influenced the market sentiment, but they did it in a peculiar way. Generally speaking, if in the last weeks, we observed an unreasonable growth, now we may observe an unreasonable decline. Fortunately, there will be almost no news this week, so there should not be a conflict between the macroeconomic background and the pair's movement. At the same time, there is no guarantee that traders will not start buying again.
There were enough trading signals on Friday and all of them were formed near the Kijun Sen line. Since none of these signals were correct, traders could work out only the first two. First, the pair bounced very crookedly from the critical line, so it bounced a bit more accurately. In the first case, it went up about 10 pips, in the second case it went up about 15 pips. Therefore, most likely, traders either closed both trades at zero, or received a minimal loss. However, a 10-15 point loss is obviously not a reason to get upset.
COT report
In 2022, the COT reports for the euro are becoming more and more interesting. In the first part of the year, the reports were pointing to the bullish sentiment among professional traders. However, the euro was confidently losing value. Then, for several months, reports were reflecting bearish sentiment and the euro was also falling. Now the net position of non-commercial traders is again bullish and strengthens almost every week. The euro is growing but a fairly high value of the net position may point to the end of the upward movement or at least, to a correction. During the given period, non-commercial traders opened 8,600 long positions, whereas the number of short positions rose by 8,500. Thus, the net positions fell by 100. Notably, the green and red lines of the first indicator have moved far apart from each other, which may mean the end of the ascending trend (which wasn't actually an uptrend because the upward movement of the last two and a half months fits under the "correction" category against the global downtrend). The number of long positions is 125,000 higher than the number of sell positions opened by non-commercial traders. Thus, the net position of the non-commercial group may continue to grow. However, the euro may remain unchanged. The overall number of short orders exceeds the number of long orders by 33,000 (711k,000 vs. 678,000).
H1 chart of EUR/USD
On the one-hour chart, EUR/USD is still very high, though it is stuck below the critical line. So far, there is no certainty that it will continue to move down, though we have been waiting for it for several weeks. We think that the probability of falling down is high, but the market may well decide otherwise. This should be taken into account. On Monday, the pair may trade at the following levels: 1.0340-1.0366, 1.0485, 1.0592, 1.0736, 1.0806, as well as Senkou Span B lines (1.0442) and Kijun Sen (1.0623). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. There are no important reports or events scheduled for today in the EU and the US. And the pattern will remain the same all through this week. We believe this is a good opportunity for a bearish correction.
What we see on the trading charts:
Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals.
Yellow lines are trend lines, trend channels, and any other technical patterns.
Indicator 1 on the COT charts reflects the net position size of each category of traders.
Indicator 2 on the COT charts reflects the net position size for the non-commercial group.
