EUR/USD 5M
The EUR/USD pair resumed its downward movement on March 30, which has been continuing for a couple of weeks. As we have already said in our fundamental reviews, now the fundamental background is such that it is not really clear what kind of factors affect the euro/dollar pair, and whether any other than technical ones can affect it at all? The correlation with the pound/dollar pair is very low. Tuesday began with a flat in the evening, as usual. The bears tried to put pressure on the pair with the opening of the European session, the price settled below the extremum level of 1.1763 and so it formed the first signal of the day. The first and only one. Traders were supposed to open short positions at the very beginning of the European session, and the target was the nearest support level at 1.1722. The price reached this level without incident and made it possible to earn 33 points. This level was subsequently surpassed, which could allow traders to remain in short positions, but given the complete absence of any fundamental news and macroeconomic reports, and since the night was approaching, in this case, we would not recommend re-entering the market. However, if some traders opened short positions at this point, they could have received a small loss, around 10 points, ending the whole day in positive territory.
EUR/USD 1H
On the hourly timeframe, you can clearly see that after surpassing the Kijun-sen line and the 1.1763 level, the price perfectly reached the support level of 1.1722. In general, the downward trend persists, as evidenced by the downward trend line. The bears hold the pair firmly in their hands and it is not yet clear how the market sentiment could change to the opposite. However, it is not entirely clear why the dollar is still rising. There are many possible reasons, ranging from the good pace of economic recovery and vaccinations in the United States, to the collapse of the Archegos Capital Management investment fund. However, we are inclined to believe that, first of all, the reasons are technical. We have already said that the dollar will likely continue to rise in the short term. The European Union will publish a report on inflation on Wednesday, March 31, which this time is forecast to accelerate to 1.3% y/y. Core inflation is expected to remain unchanged at 1.1% y/y. However, what's even more interesting is the report on changes in the number of employees in the private sector from ADP in the US - it is forecast with an increase of 500,000. If this turns out to be true, then the dollar may get another reason to rise. At the same time, these reports can be ignored, but you should be cautious once these reports are published. In general, we are still recommended trading from important levels and lines that are plotted on the hourly timeframe. The closest important level is 1.1763. Signals can be rebounds or when levels and lines are surpassed. Do not forget about placing a Stop Loss order at breakeven if the price moves 15-20 points in the right direction. This will protect you against possible losses if the signal turns out to be false or a sharp reversal occurs after some fundamental or macroeconomic event.
We also recommend that you familiarize yourself with the forecast and trading signals for the GBP/USD pair.
COT report
Recall that the EUR/USD pair did not rise or fall during the last reporting week (March 16-22). Despite the fact that the downward movement resumed later, at that moment there was a flat. And the new Commitment of Traders (COT) report, which precisely describes that period of time, recorded small changes in the sentiment of all groups of traders. For example, the most important "non-commercial" group closed about 1,700 buy contracts (longs) and 953 sell contracts (shorts) during the reporting week. Thus, the net position for professional traders remained practically unchanged. And along with it and the mood of the major players. As a reminder, the last few COT reports have signaled that bullish sentiment has significantly weakened among a group of non-commercial traders. This is eloquently signaled by the green line of the first indicator. Its tangible decline began in February and continues to this day, which, in principle, coincides with the euro/dollar pair's movement. And in general, we could even conclude that the upward trend is over, since, recall, that its end has been brewing since September 2020, when the green and red lines of the first indicator moved as far apart as possible. But then the factor of a huge increase in the gap between the money supply of the US and the EU played into the hands of the euro. The same could happen in 2021, given the plans of US authorities to inject another $6-7 trillion into the economy. Thus, the technical picture and COT reports now speak in favor of the quotes' decline, but the foundation warns that the dollar may fall.
Explanations for the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the "non-commercial" group.
