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EUR/USD 5M
The EUR/USD pair traded in an "adverse" way on May 5. The quotes changed the direction of its movement twice during the European trading session, but at least it was done in a smooth way. A "swing" began at the US session, mixed with a flat, so it became completely impossible to trade. But first things first. At the beginning of the European trading session, the first sell signal was formed when the quote surpassed the extremum level of 1.2003. Subsequently, only the closest extremum level of 1.1988 was reached, to which there were only 15 points. Therefore, even though the nearest target level had been reached, we considered the sell signal to be false, since the price did not go down even 15 points after it was formed. Nevertheless, traders should have avoided losses on this trade, since the rebound from the level of 1.1988 was already a buy signal, so they should have closed short positions here and opened long ones. Long positions should be maintained until the moment when the price went up 15 points. The pair has already surpassed the 1.2003 level by that time, so one should have expected growth to reach the next target of the Senkou Span B line (1.2030). The pair failed to reach this level, so it started to fall to the level of 1.2003. Thus, the second signal also turned out to be false, and the buy trade was closed by Stop Loss at breakeven. Afterwards, at least three more signals appeared in different directions near the level of 1.2003, which should have already been filtered out, since before that false signals were formed near this level twice. Subsequently, we removed this level from the charts. A blatant flat began at the US session, therefore, it should have been clear that the pair should not have been traded further at all.
As for macroeconomic events, the number "1" marks the report on business activity in the services sector of the eurozone, which turned out to be slightly better than analysts' forecasts. Afterwards, the euro started rising, but it is not clear until the end, because of the report or because of the rebound from the level of 1.1988? The number "2" marks the time of the release of the ADP report on changes in the number of employees in the US private sector. Afterwards, the US dollar kept rising, as the actual value exceeded the value of the previous month - March, but at the same time it turned out to be worse than forecasted. In any case, the pair moved down 14 points in total after this report was published. The number "3" marks the ISM report on business activity in the US services sector, which turned out to be only slightly worse than forecasted, so the US dollar fell by as much 17 points after its release. Thus, all three reports were formally worked out, but the market reacted by only 12-20 points.
EUR/USD 1H
You can clearly see on the hourly timeframe that yesterday's movements were in different directions and were frankly weak. In general, the upward trend is still maintained, and the price bounced twice from the nearest upward trend line. Thus, the euro/dollar pair can now resume the upward movement, especially since the correction is already quite long against the upward trend. Bounces from the trend line could be regarded as buy signals, but they practically coincided with the signals from the 5-minute timeframe. In general, now there are even more chances for a resumption of the upward trend, however, one should carefully monitor a possible breakthrough of the trend lines. In general, we still recommend trading from important levels and lines that are indicated on the hourly timeframe. The nearest important levels are 1.1988, 1.1951 and 1.2076, as well as the Kijun-sen line (1.2060). Signals can be rebounds or breakthroughs of these levels and lines. Do not forget about placing a Stop Loss order at breakeven if the price moves 15-20 points in the right direction. This will protect you against possible losses if the signal turns out to be false. The European Union is set to publish a report on retail sales for March, as well as a speech by European Central Bank President Christine Lagarde. Meanwhile, a standard, weekly report on claims for unemployment benefits will be published in America.
We also recommend that you familiarize yourself with the forecast and trading signals for the GBP/USD pair.
COT report
Recall that the EUR/USD pair increased by 50 points during the last reporting week (April 20-26). Take note that major players have been strenuously reducing buy contracts (longs) and opening sell contracts (shorts) since February. However, in the last couple of weeks, there has been an increase in bullish sentiment among the group of non-commercial traders. Let us recall that this is the most important group of traders, which usually determines the trading vector. Professional players opened 5,500 buy contracts and 2,900 sell contracts during the reporting week. Thus, the net position increased by 2,600 contracts. This is not much for the euro. In general, the number of buy contracts remains much higher than that of sell contracts: 202,000 versus 121,000.
Therefore, in general, we can conclude that the upward mood persists among traders and has even slightly strengthened. We also remind you about the factor regarding the injection of trillions of dollars into the American economy, which also affects the dollar exchange rate in the international currency market. Let us remind you that even if the major players sell billions of euros, but at the same time the Federal Reserve prints trillions of dollars, the euro will still go up in price. The Commitment of Traders (COT) reports reflect the actions of major players in the European currency, but do not reflect the actions of the Fed against the dollar. Given the fact that the US government will continue to develop more and more stimulus packages for the economy, we believe that the economy continues to remain in a "post-crisis state", when it is impossible to do without cash injections and incentives. This means that these infusions are in the first place in terms of the degree of influence, and not the actions of large players.
Explanations for the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the non-commercial group.
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