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EUR/USD unexpectedly regained some bullish pace on Thursday. Take note that over the past two weeks, the euro had fallen for seven consecutive days. Often, there was a lack of significant macroeconomic and fundamental background, and sometimes, they acted as mere backdrop. To put it this way: there were plenty of reasons for the euro to fall, but from time to time, corrections are also necessary. And the euro finally started to correct higher on Thursday.
Strictly speaking, yesterday's economic data shouldn't have triggered any growth for the euro. Inflation in Germany slowed significantly, which is more of a bad news for the euro. GDP in the United States grew as expected, no surprise there. The number of jobless claims was slightly below forecasts. Therefore, the euro didn't have any distinct reasons to rise on Thursday. However, as we've already mentioned, the correction would start when the market becomes saturated with selling.
Speaking of trading signals, we can highlight a few. Initially, the pair breached the level of 1.0537, but within an hour, the price dropped below this level after the release of U.S. data. Half an hour later, the pair started to trade higher again. These U.S. reports disrupted the intraday picture, but the market reacted as it did. There was nothing that could be done about it. Traders probably couldn't earn much for the day as the movements weren't particularly clear and straightforward. Regardless, it was essential to set a stop-loss to breakeven before the release of U.S. data.
On Friday, a new COT report for September 19 was released. Over the last 12 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 rising too. In the last 6-7 months, the net position has not risen but the euro remains at very high levels and is declining rather slowly. We have only witnessed a decline from the euro in the last two months and a decrease in the net position as well, which we have been waiting for for quite some time. At the moment, the net position of non-commercial traders is bullish and has significant potential for decline.
I have already mentioned the fact that red and green lines are very far from each other, which signals the end of an uptrend. This has been going on for over half a year, but eventually the situation started to change. Therefore, we believe that the uptrend is coming to an end. During the last reporting week, the number of long positions of the non-commercial group of traders decreased by 4,900 and the number of short ones fell by 6,100. The net position decreased by 11,000 contracts. The number of long positions is higher than the number of short ones of non-commercial traders by 102,000 but the gap is narrowing, which is a good sign. Even without COT reports, it is obvious that the euro should decline, and the COT reports support this scenario.
On the 1H chart, the currency pair maintains a downtrend, but has started to correct higher. We believe that the dollar will continue to rise in the medium term, but the pair could still enter a bullish correction in the near future. Overcoming the Kijun-sen line will confirm the market's intention to start a corrective phase.
On September 29, traders should pay attention to the following key levels: 1.0366, 1.0485, 1.0537, 1.0581, 1.0658-1.0669, 1.0768, 1.0806, 1.0868, 1.0935, 1.1043, as well as the Senkou Span B (1.0694) and Kijun-sen (1.0574) lines. 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.
For Friday, we can highlight the following events: Germany will publish its unemployment data. The eurozone CPI report for September will be in the spotlight, and European Central Bank President Christine Lagarde will speak. Market participants may also look to the release of U.S. data on personal income and spending, as well as the University of Michigan Consumer Sentiment Index.
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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