The EUR / USD pair was trading quite actively on April 22. Not least because of the summing up of the ECB meeting and Christine Lagarde’s press conference. The results were very unimpressive, as all the key parameters of monetary policy remained unchanged, and the rhetoric of the head of the ECB turned out to be frankly “dovish”. Ms Lagarde said that “the key rate will remain low or ANY LOWER until inflation reaches 2% or more.” Thus, the markets could understand that the regulator is ready, if necessary, to lower rates even more, which are already below zero. The regulator also made it clear that the PEPP asset purchase program will continue at an increased pace, at least until the end of March 2022, or “as long as it takes.” Thus, the market did not receive any “hawkish” signals from the ECB. Accordingly, sales of the European currency in the second half of the day were absolutely logical and reasonable. How should you work with all this information during the day? Let’s start with the fact that not a single clear signal was generated during the day. Unfortunately, this happens, but, on the other hand, no one could have predicted in advance what the rhetoric of the ECB and Christine Lagarde would be, and certainly what the market’s reaction to this information would be. Let’s remind that in the last year the markets very often ignore important fundamental and macroeconomic events. Thus, traders, according to our recommendations, should not open any positions at all during the day. During the European trading session, the quotes of the euro / dollar pair “swayed” from side to side. Not a single extreme level was worked out, as well as the Kijun-sen line. Therefore, there was not a single signal either. The number “1” in the illustration marks the place when the ECB published the results of the meeting. The number “2” marks the location when the press conference with Christine Lagarde began. We can see that at first the markets started buying the euro, but very quickly the bulls’ optimism faded away and sales began, thanks to which the pair fell by 65 points. Not a lot, but the market still reacted. Only by the end of the day the quotes worked out the critical line, but we believe that after such a strong reaction it was no longer necessary to enter the market. Now we need to give time to the market to calm down.
On the hourly timeframe, the picture is the same: before the start of the press conference, there was a “swing”, then a sharp rise and a sharp collapse of quotations. As a result, the pair ended up near the Kijun-sen line. Formally, a rebound from it can provoke a new round of upward movement. And the upward trend remains in force and is supported by two uptrend lines at once. Therefore, bull trading is still more preferable. However, we still recommend waiting for at least this morning and reevaluating the current technical picture. We still recommend trading from important levels and lines that are indicated on the hourly timeframe. The nearest important levels are 1.1951, 1.1988, 1.2003 and 1.2081, as well as the Kijun-sen line (1.2011). Signals can be “bounces” and “breaking” 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 against possible losses if the signal turns out to be false. On Friday, the European Union is scheduled to publish indexes of business activity in the services and manufacturing sectors, similar indexes will be announced in the States. In addition, ECB President Christine Lagarde and US Treasury Secretary Janet Yellen will deliver speeches today.
We also recommend that you familiarize yourself with the forecast and trading signals for the GBP / USD pair.
Recall that during the last reporting week (April 6-12), the EUR / USD pair rose by 100 points. Recall that over the past 6 weeks professional traders have been actively reducing Buy contracts and increasing Sell contracts, but the total number of buy contracts from a group of “Non-commercial” traders still remains twice as large as the number of sell contracts. This suggests that sentiment among non-commercial traders remains bullish, but has weakened in recent weeks. The new COT report showed minimal changes. During the reporting week, major players opened 2.2 thousand Buy-contracts and closed 2.2 thousand Sell-contracts. Thus, the net position increased slightly, by 4.4 thousand, that is, the mood of the major players became more “bullish”. We said earlier that the COT report data suggested the end of the uptrend back in September last year. However, from that moment on, the uptrend continued without problems, and now it may resume. This is all due to the same factor of pumping the American economy with money. Let’s ask ourselves: what exactly do COT reports display? They reflect the actions of the whales of the foreign exchange market, those players who make the majority of transactions in the foreign exchange market, that is, move it. However, COT reports do not take into account such a factor as the inflation of the money supply. It turns out to be a paradox: large players can sell off the European currency, but it will still rise in price in the end, since the amount of dollars in the economy and markets is growing. A banal logical chain: the supply grows – the price falls. Therefore, in the last, pandemic year, COT reports do not always accurately reflect what is happening on the market. However, they make it clear how the mood of professional players is changing.
Explanations for illustrations:
Price levels of support and resistance (resistance / support) – levels that are targets when opening purchases or sales. You can place Take Profit levels near them.
Kijun-sen and Senkou Span B lines – the lines of the Ichimoku indicator, transferred to the 1-hour timeframe from the 4-hour timeframe.
Support and resistance areas are areas from which the price has repeatedly bounced off.
Yellow lines – 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.