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EUR/USD 1H
The EUR/USD pair continued its downward movement on the hourly timeframe on July 7 after it reached the resistance area of 1.1326–1.1342 for the third time. The pair fell to the important Senkou Span B line, then rebounded from it, rose to the resistance level of 1.1304 and began to fall again since it failed to overcome it. Thus, we conclude that buyers still do not have enough strength to develop their own success. Bears still can not boast of anything, but in general, there is a sideways movement, which is most clearly visible on the higher timeframes. Thus, between the areas of 1.1326–1.1342 and 1.1227–1.1243, we do not recommend trading at all, since there is no trend in this area, and neither bulls nor bears have advantages.
EUR/USD 15M.
The lower channel of linear regression turned down on the 15-minute timeframe, signaling the beginning of a correction. This is exactly what happens on the hourly chart, as traders failed to overcome 1.1326–1.1342.
The COT report
The new COT report, which was released on Monday, showed that professional traders were busy closing buy contracts and opening sell contracts during the reporting week (June 24 – 30). It is interesting that the European currency fell in price during this period of time, but not too much, not by -17,000 contracts in the net position. At the same time, from a technical point of view, the euro/dollar pair is now in a flat, which is clearly visible on the 4-hour timeframe and higher. Therefore, we cannot conclude that major market participants have completely abandoned euro purchases. It should also be noted that market participants who hedge their risks, closed contracts for sale with the same zeal in the reporting week, thus slightly offsetting the actions of speculators. In total, 8,500 Buy-contracts and 3,000 Sell-contracts were closed. Thus, almost in any case, the euro should have fallen in price during the reporting week. But the future prospects of the euro are difficult to track on the COT report. All recent changes have not been trending.
The overall fundamental background for the EUR/USD pair did not change again on Tuesday. The European currency has been trading lower for most of the day, but at the same time there is no talk of forming a new downward trend yet. There was bad news for the euro. The European Commission updated its March forecasts for economic growth in the eurozone in 2020-2021, and they were worse than the previous ones. In addition, if a free trade agreement with London is not reached, the current forecasts (-8.7% of GDP) will be revised for the worse. On the other hand, mostly negative information is being received from overseas as well. In most cases, it concerns either the coronavirus or US President Donald Trump. All information regarding Trump has little effect on the current movement of the pair and the mood of traders. But daily news about new tens of thousands of Americans infected with COVID-2019 may not allow the US dollar to resume growth. However, we have already said that the European economy and the euro have a certain advantage over the US economy and the dollar in the current conditions. The only question is whether traders have fully worked out this advantage or are we waiting for another round of strengthening of the euro?
Based on all of the above, we have two trading ideas for July 8:
1) Buyers reached the area of 1.1326-1.1342 for the third time in the last month and have also failed to gain a foothold higher for the third time. Thus, we advise you to buy the euro but not before you have overcome this area with the goals of resistance levels 1.1362 and 1.1422. Potential Take Profit is up to 80 points.
2) The bears show a certain desire to return to the game, but so far their initiative is clearly not enough. The pair performed, as we expected, falling to the two strong lines of the Ichimoku indicator - Senkou Span B (1.1258) and Kijun-sen (1.1278). However, we are still waiting for the 1.1226 – 1.1242 support area to be overcome, and after that we advise you to open short positions with the goals of 1.1186 and 1.1126. The potential Take Profit in this case is from 35 to 95 points.
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