EUR/USD 1H
The euro/dollar pair started a strong upward movement on Monday morning, October 19. It is extremely difficult to substantiate this movement from a fundamental point of view, since European Central Bank President Christine Lagarde’s speech was clearly not in favor of the euro, and Federal Reserve Chairman Jerome Powell spoke about digital currencies, not monetary policy. Nevertheless, the euro started to rise in the morning, which did not stop for the entire day.
The pair’s quotes settled above the Senkou Span B and Kijun-sen lines at the end of the day, so the trend was clearly upward. But it is extremely difficult to say how long it will last, since the pair globally continues to remain in the horizontal 250-300-point channel, therefore it often changes the direction of its movement. The main reason for the euro’s growth is technical, traders failed to overcome the support area of 1.1692-1.1699.
EUR/USD 15M
Both linear regression channels turned to the upside on the 15-minute timeframe, signaling an upward movement after an unsuccessful attempt to overcome the 1.1692-1.1699 area.
COT report
The EUR/USD pair has risen in price by around 30 points during the last reporting week (October 6-12). This is very small and, as a whole, the price has not significantly changed. Trades are held in a horizontal range of 250-300 points. Therefore, data from any COT report can only be used for long-term forecasting. Nonetheless, pro traders continue to become more and more bearish. We remind you that the most important group of traders is called “non-commercial”.
This group closed 2,500 Buy-contracts (longs) and opened 5,300 Sell-contracts (shorts) during the reporting week. Thus, the net position for this group immediately fell by 7,800. At the same time, the “commercial” group, which almost always trades in the opposite direction, has become more bullish. This group of traders increased their net position by 10,000 contracts at once.
The first indicator continues to signal the convergence of the lines of net positions of these two groups of traders. We remind you that when the green and red lines diverge strongly, this is a signal of an impending reversal of the trend globally. Now these lines have begun to narrow, so we can assume that the high around the 1.20 level will remain the peak of the entire uptrend.
No macroeconomic background for the pair on Monday, despite the fact that the euro significantly grew and volatility was high. Neither Lagarde’s speech nor Powell’s speech could have an impact on the euro/dollar currency pair. No news from US President Donald Trump, or Treasury Secretary Steven Mnuchin.
Nothing that could trigger a sharp sell-off of the US dollar during the day or weekend. The only big news is Speaker of the House of Representatives Nancy Pelosi’s announcement about a 48-hour deadline, which expires today, during which Democrats and Republicans must agree on a stimulus package for the American economy. Otherwise, the deal may not be ratified and accepted before the November 3 elections. Pelosi did not explain what will happen after the deadline expires. Also, Republicans and Democrats have expressed their desire and willingness to continue working on the deal, since the differences are not as big as they were before.
Democrats are still pushing for $2.2 trillion, and Republicans are willing to help the American economy with no more than $1.8 trillion. However, this information should have supported the dollar, and not cause its sell-off … No important speeches or macroeconomic publications scheduled for Tuesday. However, traders may not need them in order to actively trade.
We have two trading ideas for October 20:
1) The pair has left the descending channel, and so buyers are back in the game. You could open long positions when the upper line of the descending channel has been crossed. At the same time, a downward pullback is very likely, afterwards it will be possible to open new longs while aiming for resistance levels of 1.1802 and 1.1882, if the price remains above the Kijun-sen (1.1743) and Senkou Span B (1.1763) lines … Take Profit in this case will be from 20 to 90 points.
2) Bears have let go of the initiative, having failed to overcome the support area of 1.1692-1.1699. So now sellers can only wait for the bulls to take a rest. You can consider opening short positions after breaking the Kijun-sen line (1.1743) while aiming for the support area of 1.1692-1.1699 and the level of 1.163. The potential Take Profit in this case is from 30 to 70 points.
Explanations for illustrations:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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