EUR/USD – 24H.
The EUR/USD currency pair has fallen by more than 250 points over the past week. Considering that the movement with minimal volatility and in a limited range was observed earlier in the month, we can conclude that the markets lost their nerves. The US currency rose again on rumors and expectations, and it is quite a typical situation for the foreign exchange market. The pound has repeatedly shown similar movements over the past four years. Therefore, we can not say that the dollar strengthened out of the blue for no reason at all.
Nevertheless, it was with the Fed meeting that the collapse in quotes began, although no specific decisions were made. Yes, the outlook for the economy has improved. There have been hints of a curtailment of the quantitative stimulus program, and the chances of a rate hike in 2022 have increased. But these are all matters of the future. At this time, everything remains the same. At the moment, the quotes are fixed below the 61.8% Fibonacci level. Therefore, the fall may continue next week with the targets of 1.1779 and 1.1703 (the previous local low). However, we still believe that the strengthening of the US dollar is not long-term. The global underlying causes haven't changed in any way recently. The global technical picture has not changed either.
Moreover, if the global downward trend ended in 2017, then for another 3-4 years at least, the dollar will tend to fall. And given the amount of money poured into the US economy by the Fed and the US government, this scenario has an even better chance of its successful implementation. Thus, we do not see the pair much below the 17th level yet.
COT report.
During the last reporting week (June 8 – 14), the EUR/USD pair fell by 70 points. The latest COT report again showed a slight weakening of the "bullish" mood among major players. However, these minimal changes in recent reports do not affect the overall picture of the situation. For example, the first indicator in the illustration above indicates a bullish trend and that non-commercial traders continue to increase buy orders in the medium term. Of course, the last three trading days were not included in the last COT report, so it is better to conclude the following report. However, based on the information that is already available to us, we can not conclude that professional traders have started to look in the direction of selling the euro currency. In addition, it should be noted that the new COT report was not released on Friday. Therefore, it should be expected a little later. It may show a severe weakening of the "bullish" mood, but so far, there is no such information. Accordingly, you need to wait for the new COT report and see what information will be contained. So far, we note that the total number of open buy contracts for non-commercial traders exceeds the total number of sell contracts by two times. The green and red lines of the first indicator move away from each other, and the histogram of the second indicator increases. All this indicates the preservation of the "bullish" mood.
The current trading week was just crazy. After a month of traders not knowing what to do, the event that finally moved the price from the dead-end happened. Moreover, as we said above, it cannot be said that the Fed made important decisions. The reaction was as if the Fed had already raised the rate, with it immediately by 0.5%. So we tend to think that the markets were waiting for some push. And this push was precisely the Fed meeting. And there were no more interesting events during this week in the United States and the European Union. We could also mention the report on inflation in the EU, but this was the final assessment of the indicator. Thus, traders already knew what to expect, so they were not impressed with the same data published a couple of weeks ago. In general, if you do not take the completely crazy reaction to the Fed meeting, the markets continue to react very selectively to any macroeconomic statistics. Thus, first of all, we need to wait for the end of the collapse of the pair and at least a correction. And then make new conclusions.
Trading plan for the week of June 21-25:
1) In the 24-hour timeframe, the trend has changed dramatically over the past week. We now have a strong downward movement. However, it can hardly be called a trend since it is very short-term. However, the drop in quotes may continue up to the 17th level. We recommend that you trade such movements on lower timeframes, where you can track any changes more quickly. The movement is strong and fast, so you need to react to any changes as soon as possible.
2) The upward movement is still canceled, although the fundamental global factors for the pair remained the same as they were. However, the price is fixed below the Kijun-sen and Senkou Span B lines, so it does not make sense to consider buy orders now. Therefore, now for the possibility of opening long positions, you should wait for signals to change the trend to an upward trend. We believe this could happen between the levels of 1.1600 and 1.1700.
Explanation of illustrations:
Price levels of support and resistance (resistance/support) – target levels when opening purchases or sales. You can place Take Profit levels near them.
Ichimoku indicators, Bollinger Bands, MACD.
Support and resistance areas – areas from which the price has repeatedly bounced before.
Indicator 1 on the COT charts – the net position size of each category of traders.
Indicator 2 on the COT charts – the net position size for the "Non-commercial" group.
The material has been provided by InstaForex Company - www.instaforex.com