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EUR/USD 1H
The euro/dollar pair just started to collapse on the hourly timeframe on February 17. Out of the blue. However, over the past year, we have repeatedly drawn your attention to the fact that the markets do not always trade the pair logically and reasonably. It's hard to even remember when the last time traders reacted to macroeconomic reports. The base for the euro/dollar pair is now very indirect. The "huge injections into the American economy" is long-term. Therefore, it is very difficult to imagine what caused the collapse on Wednesday. There were no reports in the eurozone that day, and the US data came out when the pair had already passed most of the way down. But back to the technique, after the last two trading days, the pair's quotes were below the Kijun-sen and Senkou Span B lines, as well as below the trend line. Thus, the upward trend is canceled. Consequently, chances of forming a new short-term downward trend have sharply increased. The global factors, which we have talked about more than once, make us doubtful about the further strengthening of the US dollar. Although, from a technical point of view, in the long term, another round of the downward correction will definitely not hurt. We always advise you to follow the trend anyway and do not try to guess reversals. Thus, a downward trend has now formed, therefore, we are considering trading bearish. In our last euro review, we did not recommend buying the pair and advised you to sell it, since the price surpassed the trend line the day before yesterday. Thus, our recommendations turned out to be correct, and traders could earn about 48 points of profit on short trades. Congratulations.
EUR/USD 15M
Both linear regression channels turned to the downside on the 15-minute timeframe. Thus, a downward trend has formed in the short term. There are no signs of it ending at the time of this writing.
COT report
The EUR/USD pair fell by 10 points during the last reporting week (February 2-8). The movement, of course, was more volatile during the five working days, however, price changes, as we can see, are minimal. At the same time, the group of "non-commercial" traders opened 4,700 buy contracts (longs) and closed 2,600 sell contracts (shorts). Thus, they became more bullish, and the net position increased by 7,300 contracts. Of course, a week earlier the Commitment of Traders (COT) report showed much larger changes. A week earlier, professional traders massively closed buy contracts for the euro. However, the downward trend did not end there. We have already insisted on a correctional option in the long term several times. According to this scenario, the pair has corrected to the downside enough and currently has excellent chances for a new upward trend. The data of the COT report from a week ago questioned this option, but, as we can see, the latest COT report shows rising bullish sentiments among major market players. The indicators also eloquently show that the overall sentiment remains bullish in the market. The green and red lines of the first indicator, which represent the net positions of the non-commercial and commercial groups, began to narrow again a week ago, but are still far from each other. In the long term, based solely on the COT reports, we can say that the end of the upward trend has been brewing for a long time. But what if the demand for the US dollar remains non-existent?
No macroeconomic report published in the European Union. The US published data on retail sales and industrial production in the afternoon. Take note that the pair had already gone down about 50 points when these reports were released. That is, the downward movement began much earlier than when the US reports were published. Nevertheless, as it turned out there really were reasons to buy the dollar during the US session. The retail sales report significantly exceeded forecasts (approximately five times). The report on industrial production also turned out to be stronger than traders' expectations.
No important events planned in the European Union on Thursday. Standard information on the number of new applications for unemployment benefits will be published in America. However, if the results of this indicator does not turn out to be surprising (in a good or bad sense of the word, it does not matter), we do not expect traders to react to it. So tomorrow will be a very good day, which will show if the market participants really intend to form a new downward trend or if it is just an accident.
We have two trading ideas for February 18:
1) Buyers have released the initiative and the price has settled below the trend line. Thus, we advise you to not rush into open long positions, since the pair's movements from the last two days were completely illogical and it was difficult to predict them. Perhaps such movements will persist in the market for several days. In any case, it is inappropriate to consider longs on a strong downward movement.
2) Bears suddenly took the lead and pulled down the pair. Thus, short positions that were opened on a signal to break the trend line should be closed. If traders opened new short positions on a signal to overcome the Senkou Span B line - well, if not - then it is recommended not to rush and wait for new signals to appear. An upward correction is very likely after a two-day fall. Therefore, you are advised to open new shorts in the event of a rebound from the Kijun-sen line (1.2097) (may go down during the day) with targets at 1.2058 and 1.2004. Take Profit in this case can be up to 80 points.
Forecast and trading signals for GBP/USD
Explanations for illustrations:
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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