The EUR / USD pair traded very poorly on May 4. The trading day started very predictably, with the resumption of the downward movement. We said in the last articles that, probably, everything will not end with one round of downward correction, so we are waiting for another round of the downward movement. And so it happened. However, closer to the second half of the day, this movement stopped, and the quotes rolled back sharply from their lows, and then even more sharply from their highs (local). Thus, the pair changed its direction of movement at least three times during the day, therefore, in general, a flat was observed today. If we do not take into account the Asian trading, when the pair was just in a downward movement, then in the European and American sessions the movement took place strictly between the levels of 1.2000 and 1.2036. That is, in a channel 36 points wide. Thus, again, if we do not take into account the night movements, which we do not work out, then the pair was moving not only all day in a sideways channel, but also with minimal volatility. Consequently, as soon as the normal movement ended (which was observed in the last few days), the profit that could be earned in those few days also ended. It is much more difficult to trade in a flat. Several signals were formed on the 5-minute timeframe today, which should still be rejected. Overcoming the Senkou Span B line served as a sell signal. The closest extremum level 1.2003 was worked out, and the price bounced off it. Therefore, here it was necessary to close short positions (about 12-13 points in profit) and open long positions with the target of the Senkou Span B line (1.2030). This line was also worked out and a rebound followed from it, therefore, it was necessary to close buy orders and open new short positions. The profit on the long trade was another 12 pips. However, a new attempt to go down to the level of 1.2003 was not crowned with success and the pair quotes once again returned to the Senkou Span B line, bounced off it and only after that fell down, passing 40 points within 5 minutes, and having worked out the level of 1.2003 , from which there was a rebound again. Thus, another 5 pips of profit and a new buy signal. At least 30 points could be earned today even on such a “no” movement. During the day, not a single important macroeconomic report was published.
The hourly timeframe also clearly shows that the movements were in different directions today, although during the day there were no events that could provoke sharp price reversals. In general, the uptrend is still maintained, as both uptrend lines remain relevant. Thus, the quotes of the pair may try to continue the correction to these lines and work out one or both. Bounces off trend lines can also be regarded as buy signals. In general, we are waiting for the uptrend to resume, but at the same time, it is the trend lines that will show whether this will be so. In general, we still recommend trading from important levels and lines that are indicated on the hourly timeframe. The nearest important levels are 1.1988, 1.2003 and 1.2076, as well as the Senkou Span B (1.2030) and Kijun-sen (1.2073) lines. 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 Wednesday, the European Union is scheduled to publish an index of business activity in the service sector, and in the United States – a report from the ADP on changes in the number of employees in the private sector, the index of business activity in the service sector ISM. Thus, hypothetically, tomorrow there will be data that can affect the movement of the euro / dollar pair.
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 increased 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 recall 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 euros, but at the same time the FRS prints dollars in trillions, 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 the degree 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. Take Profit levels can be placed 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.