Analysis of EUR/USD 5M

The EUR/USD currency pair displayed movements on Tuesday that are best described as a "flat." The price tested the area of 1.1362-1.1368 for the third or fourth time in recent days, which serves as the lower boundary of the sideways channel, and once again bounced off it. We did not see significant growth, but we haven't seen it in principle for a month. Throughout this time, the pair has been in a flat range, and movements within a flat are always highly random. The macroeconomic and fundamental backdrop was absent yesterday, and this evening the Federal Reserve meeting will kick off a series of important events this week. So far, the market has gladly ignored the weak report on durable goods orders in the US, does not know how to react to geopolitical issues (which is why there is no reaction at all), and does not understand what to expect from the Fed. In reality, it is obvious: the Fed will not raise rates this evening, and Kevin Warsh is unlikely to announce any tightening of policy at the next meeting in September. Therefore, the dollar previously lacked support for significant growth, and now it has even less. The sideways movement persists.

From a technical perspective, the pair remains within the sideways channel of 1.1362-1.1461, and the movements are so weak that a downward trend has formed within the flat. The European currency has been in a downward trend for almost two weeks and has managed to cover approximately 100 pips during this time. Such occurrences can be seen in the currency market.

On the 5-minute timeframe on Tuesday, two trading signals were formed. Unfortunately, the first one turned out to be blatantly false, as the price breached the area of 1.1362-1.1368 but failed to continue moving downward. The second buy signal was much better and helped to offset the loss from the first trade.

COT Report

The latest COT report is dated July 21. The weekly timeframe illustration shows that the net position of non-commercial traders has become bearish and has significantly decreased due to geopolitical events. Traders have been shedding the euro in favor of the US dollar in recent months. Donald Trump's policy has not changed, but the dollar has temporarily acted as a "reserve currency."

We still do not see any fundamental factors supporting a strengthening of the euro, while there are plenty of factors for a decline in the dollar. The war in the Middle East has temporarily made the dollar super attractive, but once that factor's "shelf life" expires, everything will revert to normal. In the long term, the euro could fall as low as $1.08 (the trend line), but the upward trend will remain relevant. Over the past months of dollar growth, the pair has not come significantly closer to this line.

The positioning of the red and blue lines of the indicator indicates a parity between bulls and bears. During the last reporting week, the number of longs in the "Non-commercial" group decreased by 9,800, while the number of shorts increased by 18,900. Consequently, the net position dropped by 28,700 contracts over the week.

Analysis of EUR/USD 1H

On the hourly timeframe, the pair continues to form a flat with boundaries at 1.1362 and 1.1461. The situation in the Middle East remains tense and is not improving, but this is not enough for further dollar growth. The market continues to ignore many factors in favor of the euro, preventing the European currency from showing any growth. The European Central Bank meeting and the central bank's hawkish stance have already been ignored twice.

For July 29, we highlight the following levels for trading: 1.1234, 1.1274, 1.1362-1.1368, 1.1461, 1.1536-1.1542, 1.1585, 1.1657-1.1666, 1.1750-1.1760, 1.1786, 1.1830-1.1837, as well as the Senkou Span B line (1.1424) and the Kijun-sen line (1.1389). The Ichimoku indicator lines may shift throughout the day, so consider this when determining trading signals. Don't forget to set a Stop Loss order to break even if the price moves in the correct direction by 15 pips. This will protect against potential losses if the signal turns out to be false.

On Wednesday, there are no significant events or reports scheduled in the Eurozone. However, there will be a Fed meeting and a press conference with Warsh in the US. Of course, these events may provoke market volatility, but the market may again see what it wants to see rather than the real picture.

Trading Recommendations:

Today, traders may consider short positions targeting 1.1274 if the price settles below the area of 1.1362-1.1368. A new rebound from the area of 1.1362-1.1368 allowed for opening long positions yesterday with targets at 1.1424 and 1.1461.

Explanations for Illustrations:

• Support and resistance levels are indicated by thick red lines, near which the movement may come to an end. These are not sources of trading signals.
• Kijun-sen and Senkou Span B lines are Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour one. They are strong lines.
• Extreme levels are indicated by thin red lines, from which the price has previously bounced. These are sources of trading signals.
• Yellow lines represent trend lines, trend channels, and other technical patterns.
• Indicator 1 on the COT charts shows the size of the net position for each category of traders.