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The EUR/USD currency pair traded very quietly on Monday once again. Throughout the day, the European currency fell by approximately 40 pips, but this movement had no impact, as the pair has been trading within a sideways channel for the fourth consecutive week. A movement of 40 pips is not enough to conclude a flat. Last week, the euro seemed to break out of the sideways channel, stabilizing above the level of 1.1461. However, it was unable to continue rising, so it is now trading again between the levels of 1.1362 and 1.1461. There were no significant events or publications on Monday, but geopolitical news kept coming in, and there was no shortage of that. It became known that the Yemeni Houthis may soon block the Bab-el-Mandeb Strait, and the U.S. is preparing to expand military operations and conduct new strikes on Iran. Thus, there is no sign of negotiations or ceasefires. The conflicting parties have returned to a military resolution of their disagreements. The U.S. dollar is not currently benefiting from this, as the market cannot react solely to geopolitics forever.
From a technical standpoint, the pair maintains minimal bullish momentum, but the trend is essentially flat. The price has returned to the sideways channel of 1.1362-1.1461, and the upward movement in recent weeks has been so weak that it is hard to speak of it as a trend. In a flat, the Ichimoku indicator lines are weak. Volatility remains low.
On the 5-minute timeframe on Monday, one sell signal was formed; however, as is easy to guess, it did not lead traders to profit. The price stabilized below the Senkou Span B and Kijun-sen lines, and that concluded the movement.
The latest COT report is dated July 14. The illustration on the weekly timeframe clearly shows that the net position of non-commercial traders remains bullish but has significantly decreased due to geopolitical events. Traders have been offloading the European currency in favor of the U.S. dollar in recent months. Donald Trump's policy has not changed, but the dollar has temporarily acted as a "reserve currency." However, this process may now be over.
We still do not see any fundamental factors strengthening the European currency, while there are plenty of factors supporting a fall in the American 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 its previous state. And it may have already expired. In the long term, the euro could fall to $1.08 (the trend line), but the upward trend will still remain relevant. Over the past months of dollar growth, the pair has not come significantly closer to this line.
The positioning of the red and blue lines of the indicator indicates parity between bulls and bears. Over the last reporting week, the number of longs in the "Non-commercial" group increased by 6,900, while the number of shorts increased by 3,300. Accordingly, the net position increased by 3,600 contracts for the week.
On the hourly timeframe, a corrective upward trend continues to form within a two-month downward trend, which resembles a flat much more. The situation in the Middle East remains tense and shows no signs of improvement. The market continues to ignore many favorable factors for the euro, which is why the European currency cannot show significant growth. The movements of recent weeks appear to be preparation for a new decline...
For July 21, we highlight the following levels for trading — 1.1234, 1.1274, 1.1362, 1.1461, 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 (1.1417) and Kijun-sen (1.1443). The lines of the Ichimoku indicator may shift throughout the day, which should be taken into account when determining trading signals. Don't forget to set a Stop Loss order to break even if the price has moved in the correct direction by 15 pips. This will protect against potential losses if the signal turns out to be false.
On Tuesday, economic sentiment indices from ZEW will be published in the EU and Germany, along with the weekly ADP employment report in the U.S. We consider all three reports to be secondary, so we do not expect a strong market reaction to them. Most likely, the flat will continue today.
Today, traders may consider short positions targeting 1.1362, as the price has stabilized below the Senkou Span B line. Long positions can be opened with targets at 1.1461 and 1.1480 if the pair bounces from the level of 1.1362.
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