The EUR / USD currency pair continued its upward movement throughout the past week. Despite the fact that the volatility was not high during the week, nevertheless, the upward movement was quite stable and the pair managed to rise by 90 points. Thus, our forecast regarding the resumption of the global uptrend continues to be fulfilled. Recall that we consider the downward movement in 2021 to be only a correction against the 2020 uptrend. The illustration clearly shows that the pair corrected 76.4% against the last turn of the uptrend and by almost 38.2% against the entire uptrend. Thus, if our hypothesis is correct, then this is quite enough to resume the uptrend. In principle, the upward movement in the past two weeks cannot be called provoked by any new factors. There has simply been no new fundamental background in recent weeks. All global factors that previously influenced the movement of the pair remained the same. Thus, we continue to believe that the US dollar will resume depreciation in 2021 as the US economy continues to pump trillions of dollars and inflation has already jumped higher in the States. We see that the buyers managed to overcome the critical line without any problems and approach the Ichimoku cloud. Overcoming the cloud will open a further way upward, towards the renewal of the maximums over the past 2.5-3 years.
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 data from the COT reports assumed the end of the uptrend as early as 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.
Macroeconomic background was rather weak this week. By and large, the markets really only reacted to the report on inflation in the US, which jumped to 2.6% in annual terms. Markets reacted by selling the dollar, but given the two-week uptrend, the European currency would have appreciated without this report, not in favor of the US currency. On Wednesday, the heads of the Fed and the ECB Jerome Powell and Christine Lagarde delivered speeches. However, they did not report anything interesting to the markets. Powell reiterated that the quantitative stimulus program will continue to be implemented until the economy fully recovers from the crisis. Christine Lagarde compared the European economy to a patient on two crutches. Crutches are budgetary and monetary incentives, and without “the patient will not be able to stand on his feet.” However, we have known all this for a long time. The European economy is in poor condition, hardly recovering and, at best, will start recovering by the summer. The American one is recovering at a rapid pace and may be the first in the world to enter the pre-pandemic curve of economic growth. However, all these factors would be important for the euro and the dollar, if the factor of the injection of trillions of dollars into the American economy did not block them. If now were the usual quiet time, the dollar would most likely show strong growth. However, the injection of exorbitant sums into the US economy is backfiring.
Trading plan for the week of April 19 – 23:
1) On a 24-hour timeframe, the trend changes to an upward one. The price came close to the 20th level, now buyers need to overcome the Ichimoku cloud and 1.2000. The closest target is the Senkou Span B line (1.2091), from which a rebound and a slight correction may follow, since the pair has been moving up almost without recoil for more than two weeks. But we continue to look forward to further growth in the coming months.
2) The downtrend has been temporarily reversed. We still believe that the US dollar lacks support from global fundamentals, so it will not continue to grow in 2021. However, we remind you that any fundamental theory must be supported by technical factors. Therefore, it is not recommended to trade down for now, as the pair went above the critical line.
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.
Indicators Ichimoku, Bollinger Bands, MACD.
Support and resistance areas are areas from which the price has repeatedly bounced off.
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.