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EUR/USD 1H
The euro/dollar pair continued a rather strong downward movement on the hourly timeframe on March 1, which began last week. Recall that the demand for the dollar sharply increased at the end of last week, which was presumably provoked by a number of factors, including macroeconomic reports and fundamental background. But the news that the new stimulus package from Joe Biden was approved by the US Congress has not yet had any effect on the dollar. We should probably wait until the bill is approved by the Senate and after that new hundreds of billions of dollars will start flowing into the economy, further increasing the US money supply. A new downward trend has formed from a technical point of view, but so far there is no trend line or channel that traders can use. Therefore, one should only rely on technical signals and levels when making trading decisions. At the moment, the quotes hit their previous low - the 1.2032-1.2042 area. Rebounding from it can provoke a round of upward correction, which should have already begun. Surpassing it will indicate a succeeding downward movement, which will raise serious questions. In our last review, we recommended selling the pair if the price settles below the Kijun-sen line, which at that time was at the 1.2166 level. We were aiming for 1.2145 and 1.2111, as well as the Senkou Span B line (1.2096). All these targets were reached on Friday, which could bring traders a profit of about 60 points. You were also advised to buy the pair if the price rebounded off the Kijun-sen line. It executed a kind of rebound, but the upward movement did not continue. Therefore, traders could get up to 20 points of loss on this trade.
EUR/USD 15M
Both linear regression channels turned to the downside on the 15-minute timeframe. Thus, in the shortest term, a downward trend has formed. However, everything will now depend on the support area of 1.2032-1.2042 and whether the price surpasses it or not. So far, there are no signs of starting a correction.
COT report
The EUR/USD pair rose by 30 points during the last reporting week (February 16-22). In recent weeks, we have pushed for a continuation of the long-term upward trend. This is partly supported by the latest Commitment of Traders (COT) reports. Over the past two weeks, the mood of large traders has not significantly changed, and when the report was released, the number of open long positions among professional traders exceeded the number of open short positions three times. Thus, on the face of a bullish mood. The latest COT report did not show any major changes either. A group of non-commercial traders opened 6,500 Buy-contracts (longs) and Sell-contracts (shorts) during the reporting week. Thus, the net position of this group of traders did not change in any way, and the mood did not become more bullish or more bearish. However, for the third week in a row, the first indicator in the chart has signaled the unchanged sentiment of non-commercial traders (who, we recall, are the engine of the foreign exchange market). The green and red lines did not rise or fall during these three weeks. Thus, the major players took a wait-and-see attitude, as it were. But the days when the pair collapsed (Thursday and Friday of this week) were not included in the new COT report. Thus, since the beginning of September last year, major players have been aiming for a downward trend, but global fundamental factors prevent them from starting it. We have already mentioned global fundamental factors more than once, it all boils down to a huge increase in the money supply in the United States in 2020.
The European Union published an index of business activity in the manufacturing sector. This figure rose from 57.7 to 57.9 in January. A similar index in two versions was published in America in the afternoon. According to Markit, business activity increased from 58.5 to 58.6, according to ISM - from 58.7 to 60.7. In any case, all three indices rose, but it was the dollar that rose in price yesterday. The market ignored these reports, and traders continued to trade under the impression of the events of the end of last week. At least, I would like to believe in this, and not because the dollar's growth is a mere coincidence.
The European Union will publish the consumer price index for February, which is expected to accelerate again to 1.0% - 1.1% in annual terms. This will be good news for the eurozone, but will this news work for the markets? There are doubts about this. From a technical point of view, a correction is brewing - and this is the most important factor right now. There are no major events scheduled in America for today.
We have two trading ideas for March 2:
1) Bulls are completely discouraged at this time and are unlikely to be able to form a new upward trend in the near future. Nevertheless, in the event of a rebound from the support area of 1.2032-1.2042, you can open long positions while aiming for the Senkou Span B (1.2101) and Kijun-sen (1.2135) lines, since the downward movement was strong - it is a correction that is necessary. Take Profit in this case can be up to 80 points.
2) Bears have taken a major step towards a new downward trend. Therefore, you are advised to open short positions in case of a rebound from the Kijun-sen (1.2135) or Senkou Span B (1.2101) lines while aiming for the support area of 1.2032-1.2042 and the support level of 1.2008. Take Profit in this case can be up to 105 points. You can also open new short positions in case the price surpasses the specified support area with targets at 1.2008 and 1.1952.
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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