EUR/USD 5-Minute Analysis
The EUR/USD currency pair continued its decline on Thursday within the horizontal channel where it has been trading for over three weeks. Currently, the price has moved to the lower boundary of this channel, marked by the Senkou Span B line. Simple technical analysis suggests that a rebound from this boundary could trigger a new upward movement within the flat range. However, we believe that the price has already spent enough time in correction, and the bulls have shown the extent of their strength. Consequently, resuming the downtrend that began three months ago seems much more likely.
We have repeatedly stated that new declines in the euro do not even require local fundamentals or macroeconomic drivers. In other words, it does not matter what decision was made at the European Central Bank meeting yesterday or Christine Lagarde's tone. The euro remains overbought and unjustifiably expensive, and the 16-year trend remains downward. Therefore, we continue to anticipate only further declines in the euro. The price exhibited considerable volatility yesterday, as explained by the ECB meeting and Lagarde's speech. However, if Lagarde had the opportunity to support the euro, she chose not to. Instead, she highlighted the weakness of the European economy, implying further monetary policy easing.
Several trading signals were formed on the 5-minute chart. Initially, the pair rebounded from the 1.0533 level and reached the nearest target area of 1.0465–1.0485. There were two rebounds from this area, but in both cases, the 1.0533 level was not retested. Thus, at least one trade closed profitably, while the other two likely closed at a Stop Loss set to breakeven.
COT Report
The latest Commitment of Traders (COT) report is dated December 3. As shown in the chart, the net position of non-commercial traders remains "bullish," though bears are gradually gaining ground. About six weeks ago, professional traders significantly increased their short positions, turning the net position negative for the first time in a long while. This indicates that the euro is now being sold more frequently than bought.
Fundamentally, there are no clear reasons for euro appreciation. Technically, the pair remains in a consolidation zone or a flat trend. On the weekly chart, EUR/USD has been trading between 1.0448 and 1.1274 since December 2022, making further declines more likely. A breakout below 1.0448 could open new downside potential for the euro.
The red and blue lines have crossed, signaling a bearish market trend. During the latest reporting week, the number of long positions among the "non-commercial" group increased by 11,400, while short positions rose by 12,800. As a result, the net position decreased by 1,400.
EUR/USD 1-Hour Analysis
The pair continues to correct and remains within a horizontal channel visible to the naked eye. As anticipated, the correction is complex and slow. We still believe there are no strong grounds for a significant rise in the euro, and we will wait for the correction to end and for the pair to resume its decline toward price parity. For instance, a break below the Senkou Span B line would signal the potential resumption of the downtrend.
We highlight the following levels for trading: 1.0269, 1.0340–1.0366, 1.0485, 1.0585, 1.0658–1.0669, 1.0757, 1.0797, 1.0843, 1.0889, 1.0935. The key indicator lines are Senkou Span B (1.0464) and Kijun-sen (1.0524). Note that the Ichimoku indicator lines may shift throughout the day, so this should be considered when determining trading signals. Also, remember to place a Stop Loss order at breakeven if the price moves 15 pips in the right direction. This helps protect against potential losses if the signal turns out to be false.
On Thursday, the Eurozone will release a relatively unimportant report on industrial production, while the U.S. economic calendar is empty. As a result, volatility may be low today. However, a breach of the Senkou Span B line would signal the continuation of the downtrend.
Illustration Explanations:
- Support and Resistance Levels (thick red lines): Key areas where price movement might stall. Not sources of trading signals.
- Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the H4 timeframe to the hourly chart, serving as strong levels.
- Extreme Levels (thin red lines): Points where the price has previously rebounded. They can serve as trading signal sources.
- Yellow Lines: Trendlines, channels, or other technical patterns.
- Indicator 1 on COT Charts: Reflects the net position size of each trader category.
