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The EUR/USD currency pair traded within a range on Friday, limited by the 1.1542 level and the 1.1657-1.1666 area. This is not a flat; it is a temporary pause before a new movement. Essentially, the market only focused on events in the Middle East for two days last week, while the other three days were spent awaiting developments, ignoring many macroeconomic data releases. The market is waiting to see whether there will be an escalation of the war in the Middle East, anticipating whether other countries will or will not enter the open conflict, and is waiting for Trump's decision on conducting a ground operation in Iran. If the situation in the region becomes more tense, the U.S. dollar may resume its rise.
However, traders need to understand that the market is currently buying the dollar not because the war in Iran will have a positive impact on the U.S. economy or will allow America to resolve geopolitical issues that will then positively reflect on the country. Essentially, we are witnessing a war initiated by the chief "peacemaker" of modern times, Donald Trump, pursuing his own objectives. Let us recall that the U.S. Congress did not decide to attack Iran or Venezuela, but who in the White House is currently interested in Congress's opinion? The dollar is rising solely because investors are fleeing riskier assets and simply need to transfer their capital somewhere. Thus, the rise in the value of the American currency lacks a solid foundation.
On the 5-minute timeframe, one trading signal was formed on Friday. During the European trading session, the pair rebounded from the area of 1.1615-1.1625, then fell to nearly 1.1542. Unfortunately, only 5 pips were needed to hit this level, but traders could still manually close their trades and realize a good profit. By the end of the day, the price returned to the area of 1.1615-1.1625, but no new signals were formed.
The latest COT report is dated March 3. The illustration of the weekly timeframe clearly shows that the net position of non-commercial traders remains "bullish," and since Trump took office as President of the U.S. for the second time, only the dollar has been falling. We cannot say with 100% certainty that the decline of the American currency will continue, but current events in the world hint at this possibility.
We still do not see any fundamental factors that would strengthen the European currency, even amid the war in the Middle East. On the other hand, there are sufficient factors for a decline in the dollar. The global downward trend remains, but what matters now is where the price has moved in the last 18 years. Since September 2022, a new upward trend has been forming, breaking the global downward trend line. Thus, the path further north is open.
The positioning of the red and blue lines of the indicator continues to indicate the persistence of a "bullish" trend. Over the last reporting week, the number of longs in the "Non-commercial" group decreased by 300, while the number of shorts increased by 20,000. Accordingly, the net position decreased by 20,300 contracts during the week.
On the hourly timeframe, the EUR/USD pair maintains a new downward trend amid geopolitical events in the Middle East. How long the dollar will continue to rise solely on this factor is unclear, as it will depend on the intensity and duration of the war, the losses on both sides, and the U.S.'s ability to achieve its set goals. However, at present, we have a downward trend.
For March 9, we highlight the following levels for trading: 1.1362, 1.1426, 1.1542, 1.1615-1.1625, 1.1657-1.1666, 1.1750-1.1760, 1.1830-1.1837, 1.1907-1.1922, 1.1971-1.1988, as well as the Senkou Span B line (1.1683) and Kijun-sen line (1.1629). The Ichimoku indicator lines may shift throughout the day, which should be taken into account when determining trading signals. Don't forget to set Stop Loss orders to breakeven if the price moves in the correct direction by 15 pips. This will protect against possible losses if the signal turns out to be false.
On Monday, a report on industrial production in Germany is scheduled for publication in the Eurozone, which currently holds no value for traders under the present circumstances. The market will again await the escalation or de-escalation of the war in the Middle East.
On Monday, traders may consider short positions in the event of a rebound from the 1.1615-1.1625 area, with a target at 1.1542. Long positions can be considered if the price consolidates above the 1.1615-1.1625 area, with targets at 1.1657-1.1666 and the Senkou Span B line.
Price levels of support and resistance – thick red lines where price movement may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines – lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour timeframe. They are considered strong lines.
Extremum levels – thin red lines from which the price has previously bounced. They are sources of trading signals.
Yellow lines – trend lines, trend channels, and any other technical patterns.
Indicator 1 on COT charts – the size of the net position for each category of traders.
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