EUR/USD 5-Minute Analysis
The EUR/USD currency pair attempted to maintain its local uptrend on Wednesday, which represents a continuation of the upward movement within a flat pattern on the daily time frame. However, it once again failed to break out of this range. There were no fundamental factors driving a surge in the euro on Monday, Tuesday, or Wednesday, as the economic landscape was largely quiet, with only a few minor events taking place.
The pair remains confined within a narrow range, supported from below by a trend line that has consistently provided strong support, from above by the 1.0524 level. However, this resistance area is unlikely to hold the euro indefinitely. We still anticipate that the trend line will eventually be broken, leading to another decline in the European currency, which is likely to coincide with a drop in the British pound as well.
From a technical standpoint, nothing has changed since Wednesday. The local uptrend persists without a clear endpoint. Since the correction is taking place on the daily timeframe, we may see several short-term trends emerge on the hourly timeframe before the situation fully resolves. The exact timing of the correction's completion remains uncertain, but it's essential to remember that any increase in the euro's value is merely a corrective movement.
Two trading signals were formed on Wednesday in the five-minute timeframe, but volatility remains low. The price initially bounced off the 1.0524 level overnight, and later, during the U.S. session, it reached the Kijun-sen line and rebounded from it. By the end of the day, the euro had returned to the 1.0524 level. The overnight sell signal was difficult to trade since the price had moved significantly downward when the European session opened. The buy signal near the critical line was more actionable, although the Kijun-sen line had shifted compared to its previous day's position.
COT Report
The latest COT report, dated February 18, indicates that the net position of non-commercial traders remained bullish for an extended period. However, bears have recently gained dominance in the market. Three months ago, there was a significant increase in the number of short positions taken by professional traders, resulting in a negative net position for the first time in a long while. This trend suggests that the euro is being sold more frequently than it is being purchased, leading to a prevailing bearish sentiment.
Currently, there are no fundamental factors supporting a strengthening of the euro. The upward movement observed in the weekly timeframe is minimal and appears to be a mere correction. The currency pair may continue to correct for several weeks or even months; however, this does not alter the long-term downtrend that has persisted for 16 years.
At present, the red and blue lines in the COT report have crossed and switched positions, indicating a bearish trend in the market. During the most recent reporting week, the number of long positions in the "Non-commercial" group increased by 4,700, while short positions decreased by 8,200. As a result, the net position grew by 12,900 contracts; nonetheless, this change does not significantly impact the overall market sentiment.
EUR/USD 1-Hour Analysis
On the hourly timeframe, the pair maintains its local upward trend. The downtrend will likely resume in the medium term, given that the Federal Reserve will likely cut interest rates only once or twice in 2025, while the European Central Bank is expected to make more cuts. However, in the short term, we may see one or two more upward trends, as the correction on the daily timeframe could take a long time and be quite complex. The euro still has no fundamental reasons for growth. The gains it occasionally makes are 80% driven by technical factors.
For February 27, the key trading levels are 1.0124, 1.0195, 1.0269, 1.0340-1.0366, 1.0461, 1.0524, 1.0585, 1.0658-1.0669, 1.0757, 1.0797, 1.0843, as well as the Senkou Span B (1.0403) and Kijun-sen (1.0480) lines. The Ichimoku indicator lines may shift throughout the day, so traders should consider this when identifying signals. It is also crucial to set a Stop Loss at breakeven if the price moves 15 pips in the right direction to minimize potential losses in case of a false signal.
On Thursday, the Eurozone has no significant economic events scheduled, while the U.S. will release its first major reports of the week. These include the third estimate of Q4 GDP and the durable goods orders report. Both releases could trigger notable market reactions.
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.
