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EUR/USD - 24H.
The EUR/USD currency pair has been steadily sliding to the level of 1.1700 during the current week. Earlier, we have repeatedly noted that we consider the level of 1.1700 to be the target for the coming weeks. In the 24-hour timeframe, it is visible that a new round of corrective movement against the global upward trend is currently continuing. And the level of 1.1700 is the minimum of the previous round of correction. Thus, given that after the first round of correction, the pullback to the top was almost one hundred percent, we believe that the current round will also end near the level of 1.1700. Another question is that traders now do not find any reason to buy the US currency more actively. Despite the COT reports, which will be discussed below, the pair remains close to its three-year highs and retains excellent chances of resuming the upward trend. Also, on the 24-hour timeframe, it is visible that the pair has passed most of the current downward movement in three trading days. These are the days when the Fed summed up the results of its last meeting and gave the market illusory hopes for an earlier curtailment of the quantitative stimulus program, for which the market seized a stranglehold. Thus, while the US dollar slowly rises in price, we are still waiting for this movement to end and the global upward trend to resume. Moreover, around the level of 1.1700 lies an important corrective level of 38.2% on the Fibonacci grid, which covers the entire upward trend, which has been going on for a year and a half.
COT report.
During the last reporting week (July 13-19), the EUR/USD pair fell by 60 points. In recent weeks, major players have continued to reduce the number of buy-contracts and increase sales contracts. It is visible on the first indicator. The green line (the net position of the "Non-commercial" group) continues to decline, and the red line (the net position of the "Commercial" group) continues to grow. Recall that when these two lines move towards each other, it means that the current trend is ending or has already been completed. However, we have repeatedly drawn traders' attention that global cash injections into the US economy continue, as the Fed has often stated. Thus, it turns out to be a somewhat paradoxical situation: professional traders sell the euro, but at the same time, it becomes very cheap and has excellent chances of resuming the upward trend. The money supply in the US continues to increase, and the dollar is now also depreciating due to high inflation and high supply in the foreign exchange market. It turns out that the situation in which the euro is getting cheaper is because players are selling it, and the dollar is getting cheaper due to the actions of the Fed and the US government.
Consequently, as a result, the currency falls, and the rate of depreciation is higher. So far, this is the euro. However, its fall is very weak. During the reporting week, non-profit traders opened another 7,000 contracts for sale and closed 5,600 contracts for purchase. Thus, their net position decreased by another 12,600 contracts, and the mood became even less "bullish." The total number of contracts for the purchase of Non-commercial is already 210,000, and for sale – 162,000. More recently, the gap was twofold.
The current trading week was very quiet. By and large, only one event of the week had at least a theoretical chance of somehow reviving the foreign exchange market. However, the ECB meeting turned out to be passing and did not provoke any special reaction. Christine Lagarde repeated at a press conference everything that traders have known for a long time. In short, she again stated that the PEPP economic stimulus program would be in effect at least until the end of March 2022, and the APP program will be in effect for a long time after the key rates are raised for the first time. Lagarde also noted that the EU economy continues to recover. However, there are risks associated with the "coronavirus," since recently, there has been an increase in the number of diseases in European countries. In general, if we have heard at least some hints from the Bank of England and the Fed about a possible curtailment of the stimulus program a little earlier than the deadline, we have not received such hints from the ECB. Perhaps that is why the European currency continues to slide down slowly, and traders do not find any reason to buy it.
Trading plan for the week of July 26-30:
1) In the 24-hour timeframe, the trend remains downward. We still expect that the decline will continue to the level of 1.1700. However, it is still unclear whether the bears will find the strength to continue selling the pair because most of the distance of the current downward spiral was covered exclusively on one event.
2) The upward movement is not relevant yet, although the fundamental global factors for the pair remained the same as they were. Nevertheless, the price continues to be located below the Kijun-sen and Senkou Span B lines. Thus, it does not make sense to consider buy orders now. Therefore, now for the possibility of opening long positions, you should wait for signals to change the trend to an upward one. We believe that this can happen between the levels of 1.1600 and 1.1700.
Explanations to the illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. Take Profit levels can be placed near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced earlier.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
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