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The EUR/USD currency pair continued its downward corrective movement on Thursday. Volatility has remained quite low for several days, and the pair's decline is purely technical. However, it cannot be denied that the geopolitical backdrop may currently provide muted support for the U.S. dollar, as the conflict in the Middle East has clearly not de-escalated in recent days. Despite the ceasefire being respected by all parties, there has been no progress in negotiations, nor any movement by both sides toward talks. Yesterday, business activity indices for the services and manufacturing sectors were published in the EU and Germany, as well as in the US and the UK, but judging by the pair's volatility, these data failed to interest the market once again. As a result, the European currency has been sluggishly declining technically throughout the week.
From a technical perspective, the upward trend may be disrupted soon. The ascending trend line has been breached, but the Senkou Span B line still remains intact. Until it is broken, we would not rush to conclude that the local upward trend has ended. Additionally, significant geopolitical news may emerge at any time, triggering a new market storm.
On the 5-minute timeframe, no trading signals were formed on Thursday. During the European trading session, the price approached the Senkou Span B line but failed to react to it. Therefore, no buy signal was generated.
The latest COT report is dated April 14. The illustration of the weekly timeframe clearly shows that the net position of non-commercial traders remains "bullish," but is rapidly decreasing due to geopolitical events. Traders are shedding European currency in favor of the U.S. dollar. Trump's policy has not changed, but the dollar is currently serving as a "reserve currency," which is driving high demand for it.
We still do not see any fundamental factors that would strengthen the euro, while there are plenty of factors that would weaken the U.S. dollar. The war in the Middle East has made the dollar temporarily super attractive, but once that "shelf life" expires, everything will revert to the way it was. In the long term, the euro could fall to as low as 1.06 (trendline), but the upward trend will still remain relevant. Currently, the pair has not strayed far from the descending trendline, which has been breached several times.
The positioning of the red and blue lines of the indicator indicates parity between bulls and bears. During the last reporting week, the number of longs in the "Non-commercial" group increased by 13,700, while the number of shorts decreased by 19,900. Consequently, the net position increased by 33,600 contracts over the week.
On the hourly timeframe, the EUR/USD pair continues to form an upward trend but is currently undergoing a correction. The situation in the Middle East remains tense but is not worsening, so there are few strong reasons for the U.S. dollar to strengthen in the near term. This week has been corrective and low-volatility, with the market awaiting major events.
For April 24, 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, as well as the Senkou Span B line (1.1674) and Kijun-sen line (1.1765). The Ichimoku indicator lines may shift during the day, which should be taken into account when determining trading signals. Don't forget to set a Stop Loss order to breakeven if the price moves 15 pips in the correct direction. This will protect against potential losses if the signal turns out to be false.
On Friday, Germany will publish the business climate index, and the University of Michigan will release the consumer sentiment index in the US. The market is likely to ignore these macroeconomic data as it does not consider them important.
On Friday, traders may open short positions if the price consolidates below the 1.1657-1.1666 area, targeting 1.1615-1.1625. Long positions can be opened on a bounce off the Senkou Span B line, targeting 1.1750-1.1760.
Price levels of support and resistance – thick red lines, around which the movement may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines – lines of the Ichimoku indicator that are carried over to the hourly timeframe from the 4-hour one. They are strong lines.
Extreme 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 of each category of traders.
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