Analysis of EUR/USD 5M

The EUR/USD pair sustained its upward movement on Thursday, but the decreased volatility is also worth noting. This indicator has begun to fall again in recent weeks after a quite active start to August. Thus, we are once again forced to observe movements of 40-50 pips daily, which is undoubtedly very little. As for the direction of movement, the euro has risen again, the dollar fell again, and the most important reports from the US again left much to be desired.

First of all, the ADP report on changes in employment in the private sector (comparable to NonFarm Payrolls) is worth noting. Its value was not just below forecasts (which no longer surprises anyone); it was the lowest in the last 3.5 years. There is no question as to why the dollar was under pressure again. The ISM Services PMI was slightly above forecasts, but it could only slow down the dollar's fall. So far this week, most of the US data again fell short of market expectations.

Friday is the final and most important day of this week. So much has already been said about the unemployment rate or NonFarm Payrolls that there is perhaps nothing more to add. Nevertheless, if these reports also turn out to be weaker than forecasts (and that will not be difficult), the dollar is in for a new fiasco.

Several trading signals were formed on Thursday, but we see no point in identifying them. The pair spent the entire day within a narrow price range containing three important lines: Senkou Span B, Kijun-sen, and the 1.1092 level. There were 20-25 pips between them, so the price immediately reached the nearest target as soon as a signal formed.

COT report:

The latest COT report dated August 27 shows that the net position of non-commercial traders has long been bullish and remains so. The bears' attempt to take over failed spectacularly. The net position of non-commercial traders (red line) declined in the second half of 2023 and the first of 2024, while that of commercial traders (blue line) has grown. Currently, professional players are again increasing their long positions.

We also still do not see any fundamental factors supporting the strengthening of the euro, and technical analysis indicates that the price is in a consolidation phase—in other words, a flat. In the weekly time frame, it is clear that since December 2022, the pair has been trading between levels 1.0448 and 1.1274. In other words, we have moved from a seven-month flat into an 18-month one.

At the moment, the red and blue lines are slightly moving away from each other, which indicates that long positions on the single currency are increasing. However, such changes cannot be the basis for long-term conclusions within a flat market. During the last reporting week, the number of long positions in the non-commercial group increased by 24,000, while the number of short positions decreased by 12,800. Accordingly, the net position increased by 36,800. Yet, there is still potential for the euro to fall.

Analysis of EUR/USD 1H

In the hourly time frame, the EUR/USD pair finally has a real chance to end its baseless upward trend. A new downtrend has formed. With two weeks to go until the Federal Reserve meeting, the market could very well resume rampant selling of the US dollar, but at least now, there are technical grounds to expect a drop in the pair. The price is below the Senkou Span B line, which temporarily saves the dollar.

For September 6, we highlight the following levels for trading: 1.0658-1.0669, 1.0757, 1.0797, 1.0843, 1.0889, 1.0935, 1.1006, 1.1092, 1.1137, 1.1185, 1.1234, 1.1274, as well as the Senkou Span B line (1.1122) and Kijun-sen (1.1075) lines. The Ichimoku indicator lines can move during the day, so this should be considered when identifying trading signals. Remember to set a Stop Loss to break even 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, the Eurozone will publish a report on the GDP for the second quarter in the third estimate. But who would be interested in it if the US released reports on unemployment, wages, and the labor market? The US dollar can only pray.

Explanation of illustrations:

Support and resistance levels: Thick red lines near which the trend may end.

Kijun-sen and Senkou Span B lines: These Ichimoku indicator lines, transferred from the 4-hour timeframe to the hourly chart, are strong lines.

Extreme levels: Thin red lines from which the price previously bounced. These provide trading signals.

Yellow lines: Trend lines, trend channels, and other technical patterns.

Indicator 1 on COT charts: The net position size for each category of traders