EUR/USD 1H
The euro/dollar pair abruptly moved up on the hourly timeframe on Friday, October 23, settling above the critical Kijun-sen line and then it rushed to the resistance level of 1.1882, which was already reached last week. Thus, the upward trend continues in spite of the fact that the pair previously left the ascending channel and the price was settling below the Kijun-sen line. It will be extremely difficult for traders to overcome the 1.1882 level, as well as the resistance area of 1.1887-1.1912. Take note that the euro/dollar continues to trade within a horizontal channel, even two, and the 1.1900-1.1920 level is the area of the upper boundaries of both channels. Therefore, a rebound from it is very likely. On the other hand, going beyond it will show the bulls' intentions to move up further.
EUR/USD 15M
The lower linear regression channel turned to the upside on the 15-minute timeframe, displaying the resumption of the upward movement on Friday. But further growth prospects will entirely depend on the 1.1900-1.1920 area.
COT report
The EUR/USD pair fell by around 40 points during the last reporting week (October 13-19). But in general, no significant price changes have been observed for the pair in recent months. Therefore, data from any Commitment of Traders (COT) report can only be used for long-term forecasting. The new COT report showed even fewer changes in the mood of professional traders than the previous one. Non-commercial traders, who, we recall, are the most important group of traders in the foreign exchange market, opened 1,081 Buy-contracts (longs) and 673 Sell-contracts (shorts). Take note that the "non-commercial" group decreased its net position in the last two weeks, which may indicate the end of the upward trend. However, the data provided by the latest COT report does not tell us anything at all. There are no changes, since non-commercial traders have opened almost 300,000 euro contracts. Thus, opening or closing of 1,000-2.000 contracts does not indicate anything. The lines of net positions of the "non-commercial" and "commercial" groups (upper indicator, green and red lines) continue to barely narrow, while the pair itself continues to trade in a horizontal channel. Therefore, we stick to our opinion - the upward trend is completed or is about to be completed, and the high reached near the 1.2000 level may remain the peak of this trend.
The European Union and Germany published indexes of business activity in the services and manufacturing sectors last Friday. Traders have not been reacting to macroeconomic statistics for quite some time now. However, they react to the general fundamental background. For example, the loss of 32% of GDP by the US economy in the second quarter cost the dollar approximately 13 cents paired with the euro. Thus, the deterioration in business activity may indicate serious consequences for the economy as a result of the second wave of coronavirus. In principle, this is exactly what we can say by looking at the indices. In Germany, the service sector continued to decline and reached 48.9, while it continued to decline and hit 46.2 in the European Union as a whole. The service sector, the industry that suffers the most from quarantines, epidemics and various kinds of restrictions, just began to suffer, as soon as high levels of COVID-2019 morbidity began to be recorded in Europe, compared to that of summer. Similar indices were published overseas, but they showed the exact opposite picture. The service sector is doing well and rose to 56, while the manufacturing PMI fell to 53.3.
We have two trading ideas for October 26:
1) The pair still maintains the prospects for an upward trend. And so traders are advised to continue trading up while aiming for the resistance levels of 1.1882 and 1.1939 as long as the price is above the Kijun-sen line. Take Profit in this case will be up to 70 points. However, one should take the 1.187-1.1912 area into account, which the bulls may not be able to overcome, as well as the 1.1900-1.1920 level.
2) Bears remain in the shadows. Thus, sellers need to wait for the price to break the Kijun-sen line (1.1820) in order to have reasons to open sell positions with the targets of the Senkou Span B line (1.1759) and the support area of 1.1692-1.1699. The potential Take Profit in this case is from 50 to 110 points.
Explanations for illustrations:
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.
The material has been provided by InstaForex Company - www.instaforex.com