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The EUR/USD currency pair traded lower on Tuesday and broke through the ascending trend line. As we had warned, the pair's last rise appeared to be a correction against the two-month downward trend. The upward movement was too weak and hesitant, with the market continuing to lean toward buying the dollar without clear justification. Currently, the euro is being held back from a new collapse only by the Senkou Span B line of the Ichimoku indicator. If this line is breached, the European currency will likely decline again. However, it is uncertain whether we will see strong market movements afterward, as there are few significant events scheduled this week. Yesterday, the macroeconomic backdrop was nearly nonexistent; traders could focus only on Germany's industrial production data and the ADP report from the U.S. However, both reports were, frankly, secondary and did not provoke any market reaction.
From a technical perspective, the upward trend remains in place, but the euro continues to grow very weakly. If the Senkou Span B line is breached, the downward trend will resume. While there are no visible and clear reasons for renewed growth in the U.S. dollar, this does not mean the market cannot choose to buy the American currency.
On the 5-minute timeframe, movements on Tuesday were again extremely weak. Essentially, the only trading signal was generated overnight when the price consolidated below the critical line. Today, we do not expect strong market movements; however, short positions could be opened and maintained with a target of 1.1362.
The latest COT report is dated June 30. The weekly timeframe clearly shows that the net position of non-commercial traders remains "bullish," but it has declined significantly due to geopolitical events. Traders have been selling the European currency in favor of the U.S. dollar in recent months. Trump's policies have not changed, but the dollar has served as a "reserve currency" for some time. However, this process may have already run its course.
We still do not see any fundamental factors supporting a strengthening of the euro, while there remain sufficient factors supporting a decline in the U.S. dollar. The war in the Middle East made the dollar temporarily super attractive, but when this factor's "shelf life" expires, everything will revert to normal. It may have already expired. In the long term, the euro could fall to around $1.08 (the trend line), but the upward trend will still remain relevant. Over recent months of dollar growth, the pair has not come particularly close to this line.
The positioning of the red and blue lines in the indicator indicates parity between bulls and bears. Over the last reporting week, the number of long positions in the "Non-commercial" group decreased by 11,700, while the number of short positions increased by 17,400. Consequently, the net position fell by 29,100 contracts over the week.
On the hourly timeframe, the EUR/USD pair continues to form a corrective upward trend within a two-month downward trend. The situation in the Middle East remains tense, but we do not believe that the ongoing strikes between Iran and the U.S., or the uncertainty surrounding negotiations and deal prospects, provide sufficient grounds for further strengthening of the dollar. The Fed supported the U.S. dollar three weeks ago, but the market is ignoring all factors in favor of the euro.
For July 8, we highlight the following trading levels: 1.1234, 1.1274, 1.1362, 1.1433, 1.1536-1.1542, 1.1585, 1.1657-1.1666, 1.1750-1.1760, 1.1786, 1.1830-1.1837, as well as the Senkou Span B line (1.1399) and Kijun-sen (1.1424). The Ichimoku indicator lines may shift throughout the day, which should be taken into account when determining trading signals. Remember to set a Stop Loss at breakeven if the price moves in the right direction by 15 pips. This will protect against potential losses if the signal proves false.
On Wednesday, the only interesting event will be the publication of the FOMC minutes for June. However, it's worth noting that three weeks have already passed since the Fed meeting. During this time, traders have received labor market data that could impact the Fed's sentiment. Thus, the information in the minutes may already be considered outdated.
Today, traders may consider short positions targeting 1.1362 if the price consolidates below the Senkou Span B line. Long positions can be opened if the price consolidates above 1.1433, targeting 1.1536-1.1542.
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