The EUR / USD pair was trading very predictably on May 3. The correction against Friday’s movement was quite expected. Thus, an upward movement suggested itself on the first trading day of the week. Actually, the upward movement began right from the very beginning of the European trading session. At night, the quotes of the pair were below the Senkou Span B line, and at the beginning of “Europe” they crossed it. Thus, the first and only signal of the day was formed – to buy. At this point, traders should have bought the pair. The whole trading day the pair was in an upward movement and by the middle of the American session it worked out the extremum level of 1.2076, around which it was possible to fix profits, since it would still be difficult to count on a stronger movement (especially since this is a correction) … Opening new positions on a signal near the level of 1.2076 also should not have been, since the day had already ended by that time, and a speech by Jerome Powell, chairman of the Fed, was looming on the horizon. By the way, there were also macroeconomic statistics that day. The number “1” marks the publication of the business activity index in the production sector of the European Union for April, which differed minimally from the forecasted value and the previous value and therefore did not provoke any reaction from market participants. The number “2” marks the time of the release of the US ISM Manufacturing PMI, which unexpectedly turned out to be much worse than the experts’ forecasts, which only increased the pressure on the US dollar during the day. Thus, macroeconomic statistics yesterday helped the correction, and traders could earn 37 points during the day, which is just fine for a correction Monday.
On the hourly timeframe, an upward correction is clearly visible after Friday’s downward movement. By the end of the day, the price has worked out the level of 1.2076, but in the future it may rise to the critical line. Recall that both uptrend lines remain in effect, so the uptrend continues. However, the correction against the 450-point uptrend is still too small (only 100 points), so a new round of decline in the pair can be expected during this week. Just in time for the trend lines, which are practically merging at this time. If traders manage to consolidate the EUR / USD pair above the Kijun-Sen line, this will significantly increase the likelihood of a resumption of the uptrend. In general, we still recommend trading from important levels and lines that are indicated on the hourly timeframe. The nearest important levels are 1.2003, 1.2076 and 1.2113, as well as the Senkou Span B (1.2030) and Kijun-sen (1.2081) lines. Signals can be “bounces” and “overcoming” 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. There are no important reports or events scheduled for Tuesday in the European Union and the United States. Thus, the day can be “purely technical”. If the pair quotes remain below the critical line, then we will expect a new round of downward correction.
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 20 – 26), the EUR / USD pair rose by 50 points. We would like to remind you that since February, major players have been strenuously reducing buy contracts and opening sell contracts. However, in the last couple of weeks, there has been an increase in bullish sentiment among the group of non-commercial traders. Let us remind you that this is the most important group of traders, which usually determines the trading vector. During the reporting week, professional players opened 5.5 thousand Buy contracts and 2.9 thousand Sell contracts. Thus, the net position increased by 2.6 thousand contracts. This is not much for the euro. In general, the number of buy contracts remains much higher than that of sell contracts: 202 thousand versus 121 thousand. Therefore, in general, we can conclude that the upward mood among traders remains and even increases slightly. We also remind you about the factor of the injection of trillions of dollars into the American economy, which cannot but affect the dollar exchange rate in the international currency market. Let us remind you that even if the major players sell billions of euro, but the Fed prints trillions of dollars, the euro will still go up in price. COT reports reflect the actions of major players in the European currency, but do not reflect the actions of the Fed against the dollar. Given the fact that the US government will continue to develop more and more stimulus packages for the economy, we believe that the economy continues to remain in a “post-crisis state”, when it is impossible to do without cash injections and incentives. This means that these infusions are in the first place in terms of influence, and not the actions of large players.
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.
The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines 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.