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EUR/USD 5M
The EUR/USD pair was trading quite actively on April 22. Not least because of the summing up of the European Central Bank meeting and President Christine Lagarde's press conference. The results were unimpressive, as all the key parameters of monetary policy remained unchanged, and Lagarde's rhetoric turned out to be blatantly dovish. Lagarde said that "the key rate will remain at a low level or ANY LOWER LEVEL until inflation reaches 2% or more." Thus, the markets could understand that the central bank is ready, if necessary, to lower rates even more, which are already below zero. The ECB also made it clear that the PEPP asset purchase program will continue at an increased pace, at least until the end of March 2022, or "as long as it takes." Thus, the market did not receive any hawkish signals from the ECB. Accordingly, short positions on the euro in the afternoon were absolutely logical and reasonable. How should you work with all this information during the day? Let's start with the fact that there wasn't any clear signal during the day. Unfortunately, this happens, but, on the other hand, no one could have predicted in advance what the ECB and Lagarde's rhetoric would be, and certainly what the market's reaction to this information would be. Take note that last year the markets often ignored important fundamental and macroeconomic events. Therefore, based on our recommendations, traders should not open any positions at all during the day. The quotes of the EUR/USD pair "swayed" from side to side during the European session. Not a single extreme level was reached, as well as the Kijun-sen line. Therefore, there was not a single signal either. The number "1" in the chart marks the place when the ECB published the results of the meeting. The number "2" marks the location when Lagarde's press conference began. We can see that at first the markets started buying the euro, but the bulls' optimism quickly faded away and sales began, thanks to which the pair fell 65 points. Not a lot, but the market still reacted. The quotes reached the critical line by the end of the day, but we believe that after such a strong reaction it was no longer necessary to enter the market. Now we need to give time to the market to calm down.
EUR/USD 1H
The picture is the same on the hourly timeframe: there was a "swing" before the press conference began, then a sharp rise and the quotes significantly collapsed. As a result, the pair ended up near the Kijun-sen line. Formally, a rebound from it can provoke a new round of upward movement. And the upward trend remains in force and is supported by two upward trend lines at once. Therefore, bull trading is still more preferable. However, we still recommend waiting at least this morning and reevaluating the current technical picture. We still recommend trading from important levels and lines that are indicated on the hourly timeframe. The nearest important levels are 1.1951, 1.1988, 1.2003 and 1.2081, as well as the Kijun-sen line (1.2011). Signals can be rebounds or breakthroughs of these levels and lines. 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. Today, the European Union is scheduled to publish business activity indices in the services and manufacturing sectors, similar indices will be announced in the United States. In addition, ECB President Christine Lagarde and US Treasury Secretary Janet Yellen will deliver speeches today.
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 increased by 100 points during the last reporting week (April 6-12). Notably, professional traders have been actively reducing buy contracts (longs) and increasing sell contracts (shorts) for the past six weeks. The total number of buy contracts from the non-commercial group of traders remains twice as large as the number of sell contracts. This indicates bullish sentiment among non-commercial traders although it has been less strong in recent weeks. The new COT report showed minimal changes. During the reporting week, major players opened 2,200 buy contracts and closed 2,200 sell contracts. Thus, the net position slightly increased by 4,400. That is, the mood of the major players became more bullish. We said earlier that the Commitment of Traders (COT) report data suggested the end of the upward trend back in September 2020. However, from that moment, the upward trend continued, and it may resume now. This is happening due to the flood of liquidity into the US economy. So, what exactly do COT reports display? They reflect the actions of major players of the foreign exchange market, in particular, those players who make the majority of transactions on Forex. However, COT reports do not take into account such a factor as the inflation of the money supply. Here is a paradox: large players sell off the European currency, but it will still rise in price in the end, since the amount of US dollars in the economy and markets is growing. The logic behind it is as follows:the supply grows and the price falls. Therefore, during this year of pandemic, COT reports do not always accurately reflect the actual market situation. However, they clearly show how the sentiment of professional players is changing.
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.
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