EUR/USD 5-Minute Analysis
The EUR/USD currency pair fluctuated between 1.0886 and 1.0935 throughout Wednesday. As there were no updates on new tariffs or sanctions from Donald Trump during the day, the market ceased selling the dollar. This is the primary factor behind the current movements. As previously mentioned, macroeconomic data hold little significance at the moment.
Yesterday, a critical U.S. inflation report was released, revealing a more substantial decline in inflation than expected. This increase in optimism raises the likelihood that the Federal Reserve will cut interest rates more frequently than the market expects. Normally, this would cause the U.S. dollar to weaken; however, the market currently seems indifferent about the frequency and timing of potential Fed rate cuts. The focus remains solely on Trump's tariffs.
On the hourly timeframe, it's challenging to identify a clear trend. While there is strong evidence of an upward trend, establishing a trend line or channel is nearly impossible. Price movements are entirely dependent on Trump's decisions regarding international policy, and predicting these decisions or their timing is futile. Consequently, the best strategy is to trade based on levels and the Ichimoku indicator lines.
On the 5-minute timeframe, the price bounced off the 1.0886 level twice yesterday. The first bounce had a slight deviation, while the second was less precise. Traders could have acted on the first signal, but the price fell just 10 pips short of the target level. The same scenario occurred the second time. The trading signals were not ideal, and the market is currently behaving in a rather unusual manner.
COT Report
The latest Commitment of Traders (COT) report is dated March 4. The illustration above clearly shows that the net position of non-commercial traders has remained bullish for an extended period; however, bears have recently gained the upper hand. Four months ago, the number of open short positions held by professional traders sharply increased, causing the net position to turn negative for the first time in a long time. This indicates that the euro is now being sold more frequently than it is being bought. Nevertheless, the advantage of the bears is quickly diminishing following Trump taking office as the U.S. president.
Currently, we do not observe any fundamental factors that would support a strengthening of the euro. However, one significant factor has emerged that is contributing to the decline of the U.S. dollar. It is possible that the pair will continue to correct for several more weeks or months, but the 16-year downtrend is unlikely to reverse quickly.
At this point, the red and blue lines have crossed again, indicating that the market trend is now neutral. During the last reporting week, the number of long positions in the "non-commercial" group increased by 2,500, while the number of short positions decreased by 12,800. As a result, the net position increased by another 15,300 contracts.
EUR/USD 1-Hour Analysis
On the hourly timeframe, the price continues to "shoot into space," although not as aggressively as before. A decline will likely resume in the medium term due to the difference in monetary policies between the ECB and the Fed. However, it is unclear how long the market will react to the "Trump factor." The current movement is simply market panic, and where it will take the pair remains unknown. Traders are ignoring everything except Trump's statements, and the dollar is being sold off at every opportunity.
For March 13, the key levels for trading are 1.0340-1.0366, 1.0461, 1.0524, 1.0585, 1.0658-1.0669, 1.0757, 1.0797, 1.0843, 1.0886, 1.0935, 1.1006, 1.1092, along with the Senkou Span B (1.0608) and Kijun-sen (1.0857) lines. The Ichimoku indicator lines may shift throughout the day, which should be considered when identifying trading signals. Remember to set a Stop Loss order at breakeven if the price moves 15 pips in the right direction. This will protect against potential losses if the signal turns out to be false.
The Eurozone will release industrial production data on Thursday, while the U.S. will publish the PPI index and jobless claims. All three reports are secondary. At this time, the market is entirely ignoring macroeconomic reports. Therefore, Thursday's movements will likely also depend on Donald Trump.
Illustration Explanations:
- Support and Resistance Levels (thick red lines): Thick red lines indicate where movement may come to an end. Please note that these lines are not sources of trading signals.
- Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. These are strong lines.
- Extreme Levels (thin red lines): Thin red lines where the price has previously bounced. These serve as sources of trading signals.
- Yellow Lines: Trendlines, trend channels, or any other technical patterns.
- Indicator 1 on COT Charts: Represents the net position size for each category of traders.
