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EUR/USD 5M
The EUR/USD pair was actively trading on April 30. Unfortunately, it seemed as if the pair was reluctantly traded for most of the current week, therefore, it was not possible to earn a lot during the first four trading days of the week. There were a lot of false signals, and the pair's volatility did not exceed 40 points, so it was, in principle, very difficult to trade. But all of the above does not apply to Friday. From the very morning, without even waiting for macroeconomic reports to be published, quotes began to decline and began to form signals. The first was formed at the beginning of the European session - surpassing the 1.2113 level. The pair should have been sold here. There was no rebound from the Kijun-sen line, so it was necessary to stay in short positions. A whole package of important reports was published in the European Union around this time, when the price was near the critical line.
It turns out that the inflation rate rose to 1.6% y/y, the volume of GDP in the first quarter decreased by 0.6% q/q, and the unemployment rate fell from 8.2% to 8.1%. This series of reports could be interpreted in different ways. For example, a seemingly strong unemployment report usually never triggers any market reaction. While GDP contracted in the first quarter, initial forecasts were worse than -0.6% q/q. The consumer price index rose (bad for the euro, but good for the European Central Bank's monetary policy), but at the same time core inflation (excluding changes in fuel and energy prices) fell. And in recent years, central banks have been looking at core inflation rather than overall inflation. In general, this group of reports could be interpreted in any way. Notably, the markets did not seem to react at all. The number "1" in the chart marks the moment when the eurozone reports were released. As you can see, there are no reversals and the movement did not strengthen in this place either. Let's go back to our signals. After breaking the Kijun-sen line, the quotes dropped to the extremum level of 1.2076, which was also immediately overcome, so short positions should still be kept open. This was followed by an unambiguous price rebound from the 1.2076 level and a fall to the Senkou Span B line (1.2030), from which there was also no hint of a rebound. Since we were already approaching the time when the market was about to close, here it was possible to manually close the only trade of the day to sell or take profit near the Senkou Span B line. In both cases, the profit was around 75 points. Excellent result.
EUR/USD 1H
You can also clearly see that the price has been declining on the hourly timeframe over the past day. The price settled below the Senkou Span B line at the end of the week, so chances for a succeeding decline increase. However, globally, we expect an upward trend, therefore, we believe that the pair is currently correcting after a month's growth. Accordingly, it may fall by another 100 points and hardly immediately on Monday. Both upward trend lines maintain an uptrend. In general, we still recommend trading from important levels and lines that are indicated on the hourly timeframe. The nearest important levels are 1.1988, 1.2003 and 1.2076, as well as the Senkou Span B line (1.2030). 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 and the United States are set to publish indexes of business activity in the areas of manufacturing. However, we draw your attention to the fact that the markets are very reluctant to react to macroeconomic reports.
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 50 points during the last reporting week (April 20-26). Take note that major players have been strenuously reducing buy contracts (longs) and opening sell contracts (shorts) since February. However, in the last couple of weeks, there has been an increase in bullish sentiment among the group of non-commercial traders. Let us recall that this is the most important group of traders, which usually determines the trading vector. Professional players opened 5,500 buy contracts and 2,900 sell contracts during the reporting week. Thus, the net position increased by 2,600 contracts. This is not much for the euro. In general, the number of buy contracts remains much higher than that of sell contracts: 202,000 versus 121,000.
Therefore, in general, we can conclude that the upward mood persists among traders and has even slightly strengthened. We also remind you about the factor regarding the injection of trillions of dollars into the American economy, which also affects the dollar exchange rate in the international currency market. Let us remind you that even if the major players sell billions of euros, but at the same time the Federal Reserve prints trillions of dollars, the euro will still go up in price. The Commitment of Traders (COT) reports reflect the actions of major players in the European currency, but do not reflect the actions of the Fed against the dollar. Given the fact that the US government will continue to develop more and more stimulus packages for the economy, we believe that the economy continues to remain in a "post-crisis state", when it is impossible to do without cash injections and incentives. This means that these infusions are in the first place in terms of the degree of influence, and not the actions of large players.
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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