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EUR/USD 5M
The EUR/USD pair was trading ultra calm again on Monday. Again and again we have to draw the attention of traders to very weak volatility, which reached only 33 points. Obviously, with such a value of this indicator, it is impossible to actively trade and earn money. We would even say that the lack of signals on such days is a blessing. Because with low volatility and especially in the absence of trend movement, a large number of false signals can be formed, which is fraught with losses. No macroeconomic event took place in the European Union or the United States on Monday. This can partly explain the very weak movement. However, do not forget that the pair has been moving in this mode for a couple of months already: 3 days out of 5 with a volatility of 30-40 points and two more or less active. Last Friday was more or less active, so today there was a high probability of low volatility and flat. The quotes did not even approach any important level or line during the day. Therefore, there were no even hypothetical moments of signal formation during the day.
EUR/USD 1H
The trading picture looks a little better on the hourly timeframe. In particular, due to the fact that an upward trend line was formed today. And although the movement remains ultra-weak, nevertheless, traders now have a benchmark at least. In addition, a rebound from a trend line can be used as a buy signal, and breaking it can be used as a sell signal. In general, we continue to expect further growth in the pair's quotes. We have said on several occasions that the overall fundamental picture has not changed lately. From our point of view, the US dollar continues to remain in the "risk zone" as the Federal Reserve continues to pump the US economy with hundreds of billions of dollars. Moreover, given the sharp drop in consumer confidence from the University of Michigan on Friday, we believe that the US economy may slow down soon. Perhaps the coronavirus will play an important role in this slowdown. Now around the world, and, in particular, in the United States, there is an increase in the number of cases of the disease. Moreover, scientists have discovered several more new strains, which are even more infectious and more dangerous to humans. A slowdown in the economy will mean that the Fed may not dare to announce in September the timing of the withdrawal of the quantitative stimulus program. And in general, postpone the discussion of this issue to a later date. And the dollar, in order to continue its strengthening against the euro, needs the support of the fundamental background. A possible tightening of the Fed's monetary policy is just one of the few factors that can support the demand for the dollar in the medium term. And the dollar may lose this factor.
On Tuesday, we continue to recommend considering trading from important levels and lines. The closest important levels at this time are 1.1704, 1.1756, 1.1852, 1.1894, as well as the Senkou Span B (1.1810) and Kijun-sen (1.1755) lines. The Ichimoku indicator lines can change their position 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 points in the right direction. This will protect you against possible losses if the signal turns out to be false. On August 17, the European Union will publish the GDP level for the second quarter, as well as the change in the employment level in July. These reports may provoke a reaction from the market, but the chances of this, to be honest, are slim. If the forecasted GDP (+ 2.0% q/q) is exceeded in the second estimate, then the European currency may rise in price by 20-30 points after this report. Reports on retail and industrial production will be published in America. Traders may well ignore them as well. Moreover, the forecasts are not high. However, they can also be worked out, so utmost care is required. Fed Chairman Jerome Powell will speak late in the evening, and this event can be called the key event of the day. The fate of the dollar in the near future may depend on Powell's rhetoric.
We also recommend that you familiarize yourself with the forecast and trading signals for the GBP/USD pair.
COT report
The EUR/USD pair fell by 140 points during the last reporting week (August 3-9). Since the European currency has generally fallen in recent weeks, it is not surprising that the Commitment of Traders (COT) report showed that the bullish sentiment has weakened among professional traders. However, the euro/dollar pair has been declining in recent weeks very reluctantly, and major players have massively stopped closing buy contracts and open sell contracts. A group of non-commercial traders opened 11,000 Buy-contracts (longs) and 18,000 Sell-contracts (shorts) during the reporting week. Thus, the net position for professional players decreased by another 8,000. However, the indicators below the chart show that although the net position continues to decline, the rate of its decline is decreasing. In addition, as we have already said, the euro dropped to the level of 1.1700, around which the probability of an upward reversal is very high. The first indicator shows that the green and red lines (net positions of the "non-commercial" and "commercial" groups) continue to move towards each other, which means the continued weakening of the upward trend. Recall that when the lines begin to narrow, it means the end of the current trend. However, at the same time, the situation on the chart looks just like a correction. Thus, we believe that at this time, both indicators are signaling exactly a correction. As before, we must not forget that the Federal Reserve has not yet completed the quantitative stimulus program, thanks to which the US economy continues to be pumped with money, which provokes an increase in inflation and an increase in the supply of the dollar in the foreign exchange market. Therefore, we are still expecting a new round of decline in the dollar. The sentiment of the major players remains bullish as the total number of buy contracts still exceeds the number of sell contracts.
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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