EUR/USD 5-Minute Analysis

The EUR/USD currency pair showed a relatively substantial rise on Monday. We believe there was no macroeconomic or fundamental justification for such a sharp depreciation of the U.S. dollar that day. However, as previously noted, the market no longer needs strong reasons to sell off the dollar. The greenback is sold off easily and confidently, unlike the euro, which still can't boast a strong economy or a hawkish ECB policy. Nevertheless, none of these factors matter right now. Any factors—except the trade war—are irrelevant for the dollar. Occasionally, it does appreciate, but the market only wants to buy the U.S. currency when news of trade de-escalation emerges—and such news doesn't arrive every week. Meanwhile, a downgrade of the U.S. credit rating by Moody's could trigger a sell-off.

From a technical standpoint, we now see a resumption of the uptrend. The price had been correcting lower for about a month, but the uptrend, which has been in place for more than three months, remains intact. Naturally, a lot depends on Donald Trump's future actions. Although we cannot predict his next moves, we acknowledge this: the uptrend holds.

Regarding trade signals on Monday, we should highlight the breakout above the 1.1185 level and the drop below 1.1274. In the first case, traders could have entered long positions, which should have been closed at the first sell signal—specifically, the drop below 1.1274. At that point, traders could have entered short positions, which could have been closed near the Senkou Span B line. Therefore, two trades could have been opened—both closed with solid profit.

COT Report

The most recent Commitment of Traders (COT) report is dated May 13. As the chart above illustrates, the net position of non-commercial traders has long remained bullish. Bears briefly overtook but quickly lost control. Since Trump took office, the dollar has been falling sharply. While we can't guarantee that this decline will continue indefinitely, COT reports reflect the sentiment of major market players, though in current circumstances, that sentiment can shift quickly.

There are no fundamental reasons for the euro to strengthen, but the dollar faces a significant political burden. EUR/USD may continue to correct for several more weeks or months, but the broader 16-year downtrend won't reverse so quickly. Once Trump's trade wars end, the dollar may resume its upward trend.

The red and blue lines on the COT chart have crossed again, signaling a renewed bullish trend. During the last reporting week, the number of long positions from non-commercial traders increased by 15,400, while shorts rose by 6,300. As a result, the net position grew by 9,000 contracts.

EUR/USD 1-Hour Analysis

In the hourly timeframe, EUR/USD is attempting to resume its uptrend and has secured a position above the Ichimoku indicator lines. The outlook for the U.S. dollar still depends primarily on the progression of the global trade war. The dollar may continue to recover if trade agreements are signed and tariffs are reduced. Otherwise, or in the presence of new negative drivers, the dollar will likely continue to depreciate. Technical analysis and macroeconomic data currently have minimal influence—everything depends on news related to trade negotiations.

Key levels to watch for May 20: 1.0823, 1.0886, 1.0949, 1.1006, 1.1092, 1.1147, 1.1185, 1.1234, 1.1274, 1.1321, 1.1426, 1.1534. Ichimoku lines: Senkou Span B (1.1224), Kijun-sen (1.1193). Note: Ichimoku lines may shift during the day and should be accounted for when determining trade signals. Also, don't forget to set a Stop Loss to breakeven once the price moves 15 pips in the correct direction to protect against potential false signals.

On Tuesday, no significant reports or events are scheduled in the U.S. or the Eurozone. As a result, traders will have little to react to during the day. However, Monday again demonstrated that even secondary news can trigger a significant dollar drop. That said, such impactful news doesn't arrive every day, so we're likely to see weak, sideways price movement today.

Illustration Explanations:

• Support and resistance price levels – thick red lines where movement may end. They are not trading signal sources.
• Kijun-sen and Senkou Span B lines—These are strong Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour one.
• Extremum levels – thin red lines where the price has previously rebounded. These act as trading signal sources.
• Yellow lines – trend lines, trend channels, and other technical patterns.
• COT Indicator 1 on the charts – the size of the net position for each category of traders.