The EUR/USD pair again showed a rather weak movement on Monday. During the day, there were attempts to continue the ascent to local highs, but the euro's growth did not last long. There were simply no important macroeconomic events on Monday, but this situation is twofold. On the one hand, the euro still showed growth during the day. On the other hand, its growth is clearly slowing down in recent years. At the same time, the pound, which has shown similar dynamics in recent months, has settled below the rising trend line for the second time. Therefore, we believe that in the coming weeks, the euro and the pound may continue to rise, but the growth will be much less strong than in the last two weeks. We can say that the rapid growth after falling to multi-year lows has occurred, but now the market is wondering what are the reasons for further long positions on European currencies? As we have already said in the fundamental articles, there are none. The euro and pound can grow only due to technical factors. For example, factors of the need to correct and factors of strong oversold in both currencies. Therefore, we do not expect that both currencies will quickly recover all the losses of recent months against the dollar.
Despite the fact that the movement on Monday was not the strongest, two trading signals were still formed. In both cases, a rebound from the extreme level of 1.0748 was recorded. The first time the price went up 27 points, the second time - 29. That is, in both cases, traders had the opportunity to set Stop Loss to breakeven, so there was absolutely no loss on any open position. It was quite difficult to get a profit, since the nearest level at 1.0806 was not too far away and it was possible to count on its development. But the price never managed to reach it.
The latest Commitment of Traders (COT) reports on the euro raised a lot of questions. Recall that in the past few months, they showed a blatant bullish mood of professional players, but the euro fell all the time. Now the situation has begun to change, but not at the expense of the market players themselves, but due to the fact that the euro has begun to grow. That is, the mood of traders remains bullish (according to COT reports), and the euro began to grow due to the fact that it needs to be corrected from time to time. During the reporting week, the number of long positions increased by 6,300, while the number of shorts in the non-commercial group decreased by 12,200. Thus, the net position grew by 18,500 contracts per week. The number of long positions exceeds the number of short positions for non-commercial traders by 40,000 already. From our point of view, this happens because the demand for the US dollar remains much higher than the demand for the euro. Now a certain "respite" has begun for the euro, but this does not mean that tomorrow the global downward trend will not resume, and the data from COT reports will not continue to contradict the real state of things on the market. We therefore believe that such reporting data still cannot be relied upon for forecasting. At this time, both on the 4-hour timeframe and on the hourly there are clear trends, trend lines, and channels that indicate where the pair will move next. It is better to rely on them when making trading decisions.
It is clearly seen on the hourly timeframe that the ascending trend line remains relevant. The pair has already come close to this line, so in the near future it may settle below it. If this happens, then the upward movement will be canceled for some time, and the euro may fall by 100-200 points. We believe that this is the most likely scenario for the coming weeks: successive movements in different directions without a clear upward trend, but with an upward bias. Today we highlight the following levels for trading - 1.0459, 1.0579, 1.0637, 1.0748, 1.0806, 1.0938, as well as Senkou Span B (1.0549) and Kijun-sen (1 .0714). Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. There are also secondary support and resistance levels, but no signals are formed near them. Signals can be "rebounds" and "breakthrough" extreme levels and lines. Do not forget about placing a Stop Loss order at breakeven if the price has gone in the right direction for 15 points. This will protect you against possible losses if the signal turns out to be false. Today the European Union is set to publish inflation for May and this report is important enough to provoke a market reaction. There will be nothing interesting and important in the US.
