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On Thursday, EUR/USD rallied in the first half of the day then it bounced bearishly in the second half. Volatility reached almost 100 pips, which is quite high, but of course, it reached this high value due to important data that weren't available in the first three days of the week. The inflation report wasn't just an important report; it was essentially the only report of this week. Of course, there were and will be various reports of secondary importance, like the consumer sentiment index and so on. But they don't compare to inflation in any way. The Consumer Price Index rose to 3.2%, and the market initially didn't even understand how to react. By the end of the day, it realized that any increase in inflation automatically translates to higher chances of a Federal Reserve rate hike, which is why the dollar was firmer.
Among the trading signals, we highlight the very first buy signal around the critical line. Prior to the release of the US inflation data, the price managed to rise almost to the Senkou Span B line, where it was appropriate to manually close the trade. The profit was about 30 pips. During and for several hours after the release, the pair experienced turbulence between Senkou Span B and the level of 1.1012; during this range and time, it was better not to trade. You could open short positions once the price fell below 1.1012, and profits could be taken around the critical Kijun-sen line.
On Friday, a new COT report for August 1 was released. In the last 10 months, COT reports fully corresponded to what is happening in the market. The chart above clearly shows that the net position of major traders (the second indicator) began to grow in September 2022 and at about the same time the euro started climbing too. In the last 5-6 months, the net position has not risen but the euro remains at very high levels. At the moment, the net position of non-commercial traders is bullish and remains strong. The euro keeps climbing against the US dollar.
I have already mentioned the fact that a fairly high value of the net position signals the end of an uptrend. This is also confirmed by the first indicator where the red and green lines are very far from each other. Usually, it precedes the end of the trend. During the last reporting week, the number of long positions of the non-commercial group of traders fell by 10,500 and the number of short ones by 5,400. The net position decreased by 5,100 contracts. The number of long positions is higher than the number of short ones of non-commercial traders by 172,000. This is a very large gap as the difference is almost threefold. Even without COT reports, it is obvious that the euro should decline but speculators are still in no hurry to sell.
On the 1H chart, the downtrend persists while staying within a sideways channel. We believe that the euro should fall in the medium-term period. Currently, the price is below all the lines of the Ichimoku indicator. There won't be any significant events this week, so we will likely witness flat movements.
On August 11, traders should pay attention to the following key levels: 1.0762, 1.0806, 1.0868, 1.0943, 1.1043, 1.1092, 1.1137, 1.1185, 1.1274, as well as the Senkou Span B line (1.1031) and the Kijun-sen line (1.0995). The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. Traders look for signals at rebounds and breakouts. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 15 pips. This will protect against possible losses if the signal turns out to be false.
Today, there are no important events or reports lined up in the EU. The US will release secondary reports like the producer price index and the consumer sentiment index from the University of Michigan. We do not expect these reports to provide direction for the pair.
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
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