Trading Recommendations and Analysis of EUR/USD for July 30. The Fed Is Still Waiting

The EUR/USD currency pair traded with minimal volatility for much of Wednesday, but, naturally, activity exploded in the evening. In reality, there was nothing explosive in Kevin Warsh's words or the Federal Reserve's decisions. The key rate predictably remained unchanged, and Warsh again highlighted high inflation but also noted that the June report was better than expected, giving the Fed some leeway. In other words, as we predicted, the Fed is not looking to rush into action or play ahead. If inflation has already started to decline, then why raise the rate? What if the indicator continues to fall? The geopolitical conflict has resumed? It could end again in a week, and oil prices would fall once more. Thus, the Fed will react as the situation unfolds.

The market once again expected Warsh to openly promise monetary policy tightening in September but, of course, did not receive anything of the sort. A month and a half ago, the dollar rose on Warsh's speech; yesterday, it fell on an essentially identical one. Despite all this, the EUR/USD pair remained within the sideways channel, simply moving from the lower boundary to the upper one.

From a technical perspective, the pair remains within the sideways channel of 1.1362-1.1461, and the Fed meeting did not change anything. Now that the pair has risen to the upper boundary of the channel, it is reasonable to expect a bounce from the area of 1.1461-1.1473 and a gradual movement back to the lower boundary.

On the 5-minute timeframe on Wednesday, all trading signals were formed near the Kijun-sen line. We do not consider them, as this area was near 1.1362-1.1368; in the flat, the Ichimoku indicator lines are weak, and this week two or three buy signals have already formed around 1.1362-1.1368. Traders who opened long positions on Tuesday or Monday could have realized good profits.

The latest COT report is dated July 21. The weekly timeframe illustration clearly shows that the net position of non-commercial traders has become bearish and has significantly decreased due to geopolitical events. Traders have been shedding the euro in favor of the US dollar in recent months. Donald Trump's policy has not changed, but the dollar has temporarily served as a "reserve currency."

We still do not see any fundamental factors supporting a strengthening of the euro, while there are plenty of factors for a decline in the dollar. The war in the Middle East has temporarily made the dollar super attractive, but once that factor's "shelf life" expires, everything will revert to normal. In the long term, the euro could fall to as low as $1.08 (the trend line), but the upward trend will still remain relevant. Over recent months of dollar growth, the pair has not come significantly closer to this line.

The positioning of the red and blue lines of the indicator indicates a parity between bulls and bears. During the last reporting week, the number of longs in the "Non-commercial" group decreased by 9,800, while the number of shorts increased by 18,900. Consequently, the net position dropped by 28,700 contracts over the week.

On the hourly timeframe, the pair continues to form a flat with boundaries at 1.1362 and 1.1473. The situation in the Middle East remains tense and is not improving, but this is insufficient for a new rise in the dollar. The market continues to overlook many factors in favor of the euro, preventing the European currency from forming a proper trend. The European Central Bank meeting and its hawkish stance have already been ignored twice.

For July 30, we identify the following trading levels: 1.1234, 1.1274, 1.1362-1.1368, 1.1461-1.1473, 1.1536-1.1542, 1.1585, 1.1657-1.1666, 1.1750-1.1760, 1.1786, 1.1830-1.1837, as well as the Senkou Span B line (1.1424) and the Kijun-sen line (1.1415). The lines of the Ichimoku indicator may shift throughout the day, which should be taken into account when determining trading signals. Don't forget to set a stop-loss order to break even if the price moves 15 pips in the correct direction. This will protect against potential losses if the signal proves false.

On Thursday, GDP reports for the second quarter will be published in Germany, the Eurozone, and the US. Additionally, Germany will release its inflation report for July, the US will release the PCE index, and the Eurozone will report on unemployment. As we can see, there will be plenty of data, but will it be enough to end the flat?

Today, traders may consider short positions targeting the 1.1362-1.1368 area, as the price has bounced off the 1.1461-1.1473 area. A settlement above the area of 1.1461-1.1473 will allow for opening long positions with targets of 1.1536-1.1542, leading to the long-awaited end of the flat.