EUR/USD - 24H.
The EUR/USD currency pair continued to trade in an ultra-narrow range for most of the past week. So, except Friday, the pair just stood in one place. On Friday, the quotes fell by 70 points. Thus, at this time, we can again talk about a minor correction. In general, the picture for the euro/dollar pair does not change at all. The quotes continue to be located just 150 points from their local highs reached a few weeks ago and at a distance of 250 points from their 3-year highs. Thus, the markets continue to look mainly towards the European currency. In principle, in terms of the global factors that led the currency so high, nothing changes. The US authorities continue to pump the economy with trillions of dollars, which leads to a strong inflating of the money supply and inflation. Last week, we were just able to see how much American inflation has accelerated in recent months. Fed officials continue to argue that this is a temporary phenomenon, and the consumer price index will begin to slow down in a few months. However, such statements do not have a positive impact on the US dollar. As before, the US currency may show growth from time to time. But this growth is so weak that even a correction against the main trend is hard to pull. Thus, the dollar will continue to try to strengthen in the foreign exchange market. However, it clearly does not show strong growth. The high rate of recovery in the US economy continues to be ignored by the markets in the long run.
During the last reporting week (June 1-7), the EUR/USD pair fell by 40 points. All the last weeks have ended with small changes, given that the pair has been in a limited range for several weeks now. During the reporting week, professional traders closed about 5,500 contracts for buying and about 400 contracts for selling. Thus, the net position for the "Non-commercial" group decreased by 5,000 contracts. These are small changes for the European currency, which remains the most popular among all their players in the world after the dollar itself. However, in recent years, non-commercial traders have primarily increased longs, so the data from the last reporting week can be considered an exception in some ways. So far, the main lines of the first indicator continue to move away from each other, which indicates the preservation of the "bullish" mood in the market. Therefore, we can count on a new strengthening of the European currency, especially since the global increase in the money supply in the United States continues to work in favor of the European currency.
The current trading week was quite boring in macroeconomic terms. In principle, in the European Union, we can only note the ECB meeting, during which it became known that all the main parameters of monetary policy remained unchanged. However, the regulator raised its forecasts for the next few years for GDP and said that the PEPP program's pace would be increased in the coming months. These data are not unambiguously positive or negative. The overall size of the PEPP program remains unchanged, as does its timeline. And the fact that the ECB will make purchases in large volumes for several months is not an important message for the euro. At the beginning of the year, to stop the rise in European bond yields, the ECB also reported an increase in the pace of purchases. But the most important report for the EU (on GDP for the first quarter) was completely ignored by traders. However, its third estimate was much better than the previous two and showed that the EU economy in the first quarter shrank less than previously expected. However, the euro did not feel any support. In the United States, we can only note the report on inflation, which rose to 5% in May. It is a negative moment for the dollar. However, on Thursday, when the ECB meeting was summed up, and the US inflation was published, the pair's volatility was only 50 points, and the pair generally remained at the end of the working day where it started. On Friday, there was a small collapse in the quotes of the euro currency, although there were no important publications and events on this day. Thus, we can conclude that Friday's movements were "technical" since there were no other good reasons for the dollar's growth.
Trading plan for the week of June 14-18:
1) On the 24-hour timeframe, the trend continues upward, although the price is fixed below the critical line. However, in the flat, all the lines of the Ichimoku indicator have a much lower value than in the trend. The main thing is different. The price continues to remain close to its highs for several years. The minimum downward slope was minimal. Thus, formally, longs are not relevant now, so we recommend waiting for the price to consolidate back above the Kijun-sen line and then open longs with a target of 1.2332.
2) The downward trend is still not relevant. The US currency has support in the form of macroeconomic factors. Despite the high rate of recovery of the US economy, this factor still has no beneficial effect on the dollar exchange rate. Thus, it is possible to talk about possible stronger growth of the US dollar, for example, with the aim of the Senkou Span B line. However, from our point of view, this scenario is still very unlikely.
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.