FX.co ★ EUR/USD. November 26. COT report. Is the European economy shrinking during the second "lockdown" and why is the euro currency growing?

EUR/USD – 1H.

On November 25, the EUR/USD pair consolidated above the corrective level of 100.0% (1.1920) according to the new Fibo level grid and continues the growth process towards the next level of 127.2% (1.1967). However, the key is to fix quotes above the side corridor on the 4-hour chart. Perhaps one of the most pressing issues at this time is the future of the European economy. And in the near future. It is no secret that many European countries are faced with high levels of incidence of coronavirus in the fall and they had to re-enter "lockdown". We all remember with what losses the spring "lockdown" ended. Therefore, we can expect something similar this fall/winter. Thus, I believe that all of Christine Lagarde's concerns about a new economic slowdown are not unfounded. And the European Union may face this problem in the coming weeks. Business activity in the EU services sector has already fallen. Thus, now we are waiting for a new fall in inflation, a new reduction in GDP. However, why is the euro currency not falling? In America, each state imposes its quarantine restrictions, however, there is no nationwide "lockdown", and the latest business activity indicators showed that everything is in order in the United States. It seems that here traders take into account the highest levels of morbidity in the United States (150-170 thousand daily). Although there is no "hard" quarantine, the economy may still start to stall due to such a large number of patients. By the way, the number of applications for unemployment benefits increased over the past week.

EUR/USD – 4H.

On the 4-hour chart, the pair's quotes were fixed above the upper border of the side corridor. Thus, the growth process can now be continued towards the next corrective level of 161.8% (1.2027). Today, the divergence is not observed in any indicator. The pair finally has a chance to start building a new trend.

EUR/USD – Daily.

On the daily chart, the EUR/USD pair quotes performed a new consolidation above the corrective level of 261.8% (1.1822), which increases the chances of further growth. However, this level remains weak, and the key for the pair is the side corridor on the 4-hour chart.

EUR/USD – Weekly.

On the weekly chart, the EUR/USD pair has completed a consolidation above the "narrowing triangle", which preserves the prospects for further growth of the pair, but in the long term. In the short term, a drop is preferable.

Overview of fundamentals:

On November 25, several important reports were released in America. GDP remained unchanged at 33.1% q/q, data on orders for long-term goods exceeded traders' expectations, however, data on applications for unemployment benefits were worse than forecasts.

News calendar for the United States and the European Union:

On November 26, in America and the European Union, the calendars of economic events are empty. The information background will be almost zero today.

COT (Commitments of Traders) report:

The penultimate COT report was released with some delay, so here I will analyze the changes in two reports at once. Fortunately, there are almost no changes. As well as the price changes of the euro/dollar pair in the last few months, which is visible on the 4-hour chart. Over the last two reporting weeks, the number of long contracts in the hands of the "Non-commercial" category of traders decreased by 4.5 thousand, and the number of short contracts - by 0.5 thousand. During the last reporting week, speculators opened approximately the same number of long and short contracts. Thus, in general, the changes are insignificant. The mood of speculators became a little more "bearish", but again slightly. There are even fewer changes in other categories of traders. The most important thing I would like to note is that the mood of major players is not becoming more "bullish", which means that the COT report does not indicate a resumption of the upward trend now.

EUR/USD forecast and recommendations for traders:

Today, I recommend selling the euro with a target of 1.1920, if the rebound from the level of 161.8% (1.2027) on the 4-hour chart is completed. Purchases of the pair had to be opened by fixing quotes above the side corridor on the 4-hour chart with the target level of 1.2027.

Terms:

"Non-commercial" - large market players: banks, hedge funds, investment funds, private, large investors.

"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy currency not for speculative profit, but for current activities or export-import operations.

"Non-reportable positions" - small traders who do not have a significant impact on the price.