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EUR/USD 5M
The EUR/USD pair tried to start a new round of upward movement on March 31. The current downward trend has been going on for quite a long time, as it is seen on the hourly timeframe, so it's time for a tangible correction. At least that's how it all started. The pair settled above the 1.1722 level during the European trading session, which formed the first signal - to buy. The closest target, according to our recommendations, was the extremum level of 1.1763. Everything was going well, and the euro/dollar pair was heading towards its goal. But approximately halfway through, the European Union published a report on inflation, which turned out to be worse than forecasts, and it caused the euro to fall. This is one of those moments when, after a report is published, there was a sharp reversal of the price in the opposite direction. The biggest disappointment was caused by the main consumer price index, or, as it is also called, the basic one. It slowed down from 1.1% y/y to 0.9% y/y, which cast doubt on the overall acceleration of inflation in the EU. As for the deal, in an amicable way, the long position should have been closed when the report was released, since a price reversal to the downside immediately followed. In this case, you could earn around 10-15 points. Running a little ahead, the price returned to the 1.1722 level three more times and rebounded off it three times. On the one hand, this is good, since not a single false signal was generated during the day. On the other hand, due to low volatility, the pair has never been able to reach the target level of 1.1763. Once it got close to it and traders, in principle, could take profits on the way, they still could not reach the target. It is also worth mentioning the report from ADP on changes in the number of employees in the US private sector. Despite the fact that we also pinned our hopes on it, there was no reaction (the number "2" in the chart). As a result, traders could end the day with a small profit.
EUR/USD 1H
On the hourly timeframe, we see that the euro/dollar pair spent the entire day (Wednesday) between the 1.1722 level and the Kijun-sen line, which dropped to 1.1754. The downward trend generally continues as the downward trend line continues. Bulls need to surpass 1.1754 (Kijun-sen) and 1.1761 in order to count on further growth towards the trend line. In principle, this option would be the most logical, since the downward trend is strong enough and it is time to start a correction. On Thursday, traders are advised to pay attention to reports on business activity in the manufacturing sectors of the EU and the US, as well as data on claims for unemployment benefits in the US. The ISM index will be of particular importance. As well as yesterday, once such reports are published, you should be ready for a reversal or strengthening of the movement. In general, we still advise you to trade from important levels and lines that are plotted on the hourly timeframe. The nearest important levels are 1.1761 and 1.1703. Signals can be rebounds or when levels and lines are surpassed. 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 or a sharp reversal occurs after some fundamental or macroeconomic event.
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 did not rise or fall during the last reporting week (March 16-22). Despite the fact that the downward movement resumed later, at that moment there was a flat. And the new Commitment of Traders (COT) report, which precisely describes that period of time, recorded small changes in the sentiment of all groups of traders. For example, the most important "non-commercial" group closed about 1,700 buy contracts (longs) and 953 sell contracts (shorts) during the reporting week. Thus, the net position for professional traders remained practically unchanged. And along with it and the mood of the major players. As a reminder, the last few COT reports have signaled that bullish sentiment has significantly weakened among a group of non-commercial traders. This is eloquently signaled by the green line of the first indicator. Its tangible decline began in February and continues to this day, which, in principle, coincides with the euro/dollar pair's movement. And in general, we could even conclude that the upward trend is over, since, recall, that its end has been brewing since September 2020, when the green and red lines of the first indicator moved as far apart as possible. But then the factor of a huge increase in the gap between the money supply of the US and the EU played into the hands of the euro. The same could happen in 2021, given the plans of US authorities to inject another $6-7 trillion into the economy. Thus, the technical picture and COT reports now speak in favor of the quotes' decline, but the foundation warns that the dollar may fall.
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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