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EUR/USD 5M
The EUR/USD pair showed a classic swing during the second trading day of the week. The pair changed the direction of its movement at least four times, and at the same time it never did so when certain macroeconomic reports were published. A lot of information was released yesterday, but at the same time we cannot conclude that each report had at least some impact on the movement of the euro/dollar. Nevertheless, we do not deny that some reports could really provoke a reaction from traders. Let's start to analyze everything in order. First, it should be noted that the pair fell short of reaching the extremum level of 1.2243, depriving traders of a very good sell signal. The EU Manufacturing PMI was published around the same time (figure "1" in the chart), after which the euro fell despite the fact that the report itself was positive. Thus, doubts have already emerged that traders react specifically to reports, and do not trade in their own way, completely ignoring it. Then, the most important report of the day was published - inflation in the European Union for May (figure "2" in the chart) - which showed an acceleration to 2.0% in May against the forecast of 1.9% y/y. Then the euro started falling again when literally 20 minutes had just passed, so again, we do not associate the release of the report with the pair's movement. The next report came out during the US trading session - the index of business activity in the manufacturing sector Markit (figure "3" in the chart), which increased from 61.5 to 62.1, but, as we see, after its release, the US dollar continued to fall in price. The latest was the publication of the ISM Manufacturing PMI, which is more significant than Markit. This index rose from 60.7 to 61.2, but this did not stop the dollar from falling. Thus, we tend to believe that all of the day's reports have not caused any reaction from traders. Or the reaction was almost imperceptible, which deprives it of all meaning. The only signal of the day was formed in the middle of the US session, immediately after the publication of the ISM index - going beyond the level of 1.2243. We would not recommend working it out, because at that time, as already mentioned, the ISM index came out, and it was already approaching nightfall, that is, there was not enough time. We do not consider further consolidation of quotations below the level of 1.2243, since it was already evening time.
Overview of the EUR/USD pair. 2 June. Nothing changes in the balance of power between the euro and the US dollar
Overview of the GBP/USD pair. 2 June. Is the UK on the verge of a third wave of COVID?
EUR/USD 1H
Nothing changed on the hourly timeframe on Tuesday. The pair still remained in a very limited range, but at the same time it is still visible that the current movement is not a classic flat. The fact that the quotes crossed the upward trend line last week does not play any role now. We have warned that despite breaking the trend line, the upward trend will still persist. Traders tried to go beyond the 1.2243-1.2267 range on Tuesday, but failed once again. Therefore, a new round of the downward movement may now follow. On Wednesday, we still recommend trading from important levels and lines that are indicated on the hourly timeframe. The nearest important levels at this time are 1.2160, 1.2213, 1.2243 and 1.2267, as well as the Senkou Span B (1.2197) and Kijun-sen (1.2198) lines. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. 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. European Central Bank President Christine Lagarde is set to speak at the European Union on Wednesday and this is the only potentially significant event of the day. The Beige Book Evening Review is a Fed economic review that almost never provokes any market reaction.
We also recommend that you familiarize yourself with the forecast and trading signals for the GBP/USD pair.
COT report
The EUR/USD pair rose by 60 points during the last reporting week (May 18-24). The new Commitment of Traders (COT) reports, which was released yesterday, showed that professional traders continue to increase their buying positions in the European currency. This time, they opened 3,800 new Buy contracts (longs) and closed 1,400 Sell contracts (shorts). Thus, the net position for this group of traders increased by 5,200. Not much, but also not a little. And so, the bullish mood of market participants becomes stronger again, which increases the euro's prospects for succeeding growth in 2021. The green and red lines (net positions of commercial and non-commercial traders) of the first indicator continue to move away from each other, which indicates the strengthening of the current trend (in our case, the upward trend). Therefore, at this time, the COT report clearly signals a more preferable continuation of the euro's growth. In general, professional traders have opened 240 thousand contracts for buying and 133 thousand for selling. And so there is almost twice a difference. But we continue to believe that the main factor is not the actions of professional players, but the actions of the Federal Reserve and the US Congress. The chart above clearly shows that at a certain point, the first indicator began to signal the end of the upward trend, that is, large players began to reduce longs and move to shorts. However, this did not lead to a reversal of the global trend downwards, which indicates other, more significant factors affecting the exchange rate of the European currency.
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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