Analysis of EUR/USD 5M

EUR/USD continued its downward movement on Thursday after bouncing off the level of 1.0757 a couple of days ago and then it carried out another test of this level again. Thus, we saw a smooth downturn and the price consolidated below the critical line. Also, a downtrend line was formed, which shows the current situation in the market. In general, we have no questions regarding the EUR/USD pair. Perhaps its performance isn't the best, but its recent movements have been logical and consistent. The euro has been going through a bullish correction for two months, which, in our opinion, has lasted way too long. However, the global downtrend remains intact and has now resumed. The pair is firmly moving downwards, at a gradual pace.

Yesterday, there were very few significant macroeconomic releases. We can only highlight the US reports on building permits issued and the number of housing starts. Both reports turned out to be slightly stronger than expected, which could have triggered a new upward movement for the dollar. In general, in the coming weeks, the pair may go through a bullish correction with the price surpassing the trend line, as the euro is not known for experiencing high volatility. However, for now, this is a contingency plan.

Yesterday, four trading signals were formed around the Kijun-sen line. Despite going through a downward movement during the day, volatility was generally weak. Initially, the pair rebounded twice from the critical line, then exceeded it and rebounded from below. The price could not even fall 15 pips in both cases. Take note of the weak movements, the strength of the signal is not important. However, today, traders may hold onto short positions if the price stays below the critical line.

COT report:

The latest COT report is dated June 11. The net position of non-commercial traders has remained bullish for a long time, and we're still dealing with the same situation. The bears' attempt to gain dominance failed miserably. The net position of non-commercial traders (red line) has been declining in recent months, while that of commercial traders (blue line) has been growing. But now we're seeing the opposite once again. This shows that buyers, not sellers, are currently gaining momentum again. This might be temporary since the downward trend is still valid.

We don't see any fundamental factors that can support the euro's strength in the long term, while technical analysis also suggests a continuation of the downtrend. Three descending trend lines on the weekly chart suggests that there's a good chance of further decline.

The red and blue lines are currently moving away from each other again, which indicates a build-up in long positions on the euro. During the last reporting week, the number of long positions for the non-commercial group decreased by 1,200, while the number of short positions increased by 23,000. Accordingly, the net position decreased by 14,200. We may witness the start of increasing bearish pressure. According to the COT reports, the euro has a lot of potential to fall.

Analysis of EUR/USD 1H

On the 1-hour chart, EUR/USD has started to form a new downward trend, which is part of the global trend. As before, we expect the single currency to fall. At this time, the pair is going through a technical correction, and it may already be completed. Volatility has once again dropped to absolute lows, making it quite difficult to conduct analysis and trading. The bullish correction could last for a considerable time, but sellers currently have a support line - the trend line.

On June 21, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0797, 1.0836, 1.0889, 1.0935, 1.1006, 1.1092, as well as the Senkou Span B (1.0818) and Kijun-sen (1.0725) lines. The Ichimoku indicator lines can move during the day, so this should be taken into account when identifying trading signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 15 pips. This will protect you against potential losses if the signal turns out to be false.

On Friday, business activity indices for the services and manufacturing sectors will be published in Germany, the European Union, and the United States. We should mention that the United States has its own ISM business activity indices, which the market pays more attention to than the S&P indices. European indices are quite important for traders.

Description of the chart:

Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;

The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;

Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;

Yellow lines are trend lines, trend channels, and any other technical patterns;

Indicator 1 on the COT charts is the net position size for each category of traders;