Outlook for EUR/USD on August 16. COT report. The euro continues to slide
August 16, 2023 7:24 am
Analysis of EUR/USD 5M
On Tuesday, the EUR/USD tried to start a new wave of corrective movement within the new downtrend but failed to settle above the 1.0943 level. Thus, the price remains below the Kijun-sen line, so the euro has a chance to fall further. At the beginning of the week, we said that this week’s macroeconomic background does not imply either a dollar rally or strong euro growth either. Therefore, if there is a corrective phase, it will be weak, and if there is a trend, it will also be weak. So far, everything is going exactly according to the script. Yesterday, the EU released two secondary reports, while the US published one minor report. The European macro data supported the euro, while the US report supported the dollar. By the end of the day, the pair returned to the positions from which it started.
There were three trading signals on Tuesday. The price bounced off the 1.0943 level three times. In the first case, it fell by more than 15 pips but returned, so the deal was closed at breakeven by the Stop Loss order. The second time, it went down less than 15 pips and returned. The third time, it went down 20-30 points, which is what traders could have earned. Thus, yesterday ended with a small profit, but the movements and volatility were not impressive.
COT report:
On Friday, a new COT report for August 8 was released. In the last 11 months, COT reports fully corresponded to what is happening in the market. The chart above clearly shows that the net position of major traders (the second indicator) began to grow in September 2022 and at about the same time the euro started climbing too. In the last 6-7 months, the net position has not risen but the euro remains at very high levels. At the moment, the net position of non-commercial traders is bullish and remains strong. The euro keeps climbing against the US dollar.
I have already mentioned the fact that a fairly high value of the net position signals the end of an uptrend. This is also confirmed by the first indicator where the red and green lines are very far from each other. Usually, it precedes the end of the trend. During the last reporting week, the number of long positions of the non-commercial group of traders fell by 12,000 and the number of short ones increased by 10,200. The net position decreased by another 22,200 contracts. The number of long positions is higher than the number of short ones of non-commercial traders by 150,000. This is a very large gap as the difference is almost threefold. Even without COT reports, it is obvious that the euro should decline but speculators are still in no hurry to sell.
Analysis of EUR/USD 1H
On the 1H chart, the pair broke out of the sideways channel, where it had spent two weeks, but this does not mean that the downward movement will be strong and stable. There are quite a lot of macro data this week, so the euro might also receive some support from time to time. However, in general, we expect the pair to fall.
On August 16, traders should pay attention to the following key levels: 1.0762, 1.0806, 1.0868, 1.0943, 1.1043, 1.1092, 1.1137, 1.1185, 1.1274, as well as the Senkou Span B line (1.0980) and the Kijun-sen line (1.0968). The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. Traders look for signals at rebounds and breakouts. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 15 pips. This will protect against possible losses if the signal turns out to be false.
Today, the EU will publish reports that are quite important by “name” – GDP for the second quarter and industrial production. But in reality, they have extremely low chances of provoking a market reaction. Most likely, it will be weak or the market might not even react. The US will release an industrial production report and the minutes of the last Federal Reserve meeting. These are also secondary events that we don’t expect much from. The minutes will be published late in the evening and will not affect the pair’s movement during the day.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
The material has been provided by InstaForex Company – www.instaforex.com
Analysis of EUR/USD 5M
On Tuesday, the EUR/USD tried to start a new wave of corrective movement within the new downtrend but failed to settle above the 1.0943 level. Thus, the price remains below the Kijun-sen line, so the euro has a chance to fall further. At the beginning of the week, we said that this week’s macroeconomic background does not imply either a dollar rally or strong euro growth either. Therefore, if there is a corrective phase, it will be weak, and if there is a trend, it will also be weak. So far, everything is going exactly according to the script. Yesterday, the EU released two secondary reports, while the US published one minor report. The European macro data supported the euro, while the US report supported the dollar. By the end of the day, the pair returned to the positions from which it started.
There were three trading signals on Tuesday. The price bounced off the 1.0943 level three times. In the first case, it fell by more than 15 pips but returned, so the deal was closed at breakeven by the Stop Loss order. The second time, it went down less than 15 pips and returned. The third time, it went down 20-30 points, which is what traders could have earned. Thus, yesterday ended with a small profit, but the movements and volatility were not impressive.
COT report:
On Friday, a new COT report for August 8 was released. In the last 11 months, COT reports fully corresponded to what is happening in the market. The chart above clearly shows that the net position of major traders (the second indicator) began to grow in September 2022 and at about the same time the euro started climbing too. In the last 6-7 months, the net position has not risen but the euro remains at very high levels. At the moment, the net position of non-commercial traders is bullish and remains strong. The euro keeps climbing against the US dollar.
I have already mentioned the fact that a fairly high value of the net position signals the end of an uptrend. This is also confirmed by the first indicator where the red and green lines are very far from each other. Usually, it precedes the end of the trend. During the last reporting week, the number of long positions of the non-commercial group of traders fell by 12,000 and the number of short ones increased by 10,200. The net position decreased by another 22,200 contracts. The number of long positions is higher than the number of short ones of non-commercial traders by 150,000. This is a very large gap as the difference is almost threefold. Even without COT reports, it is obvious that the euro should decline but speculators are still in no hurry to sell.
Analysis of EUR/USD 1H
On the 1H chart, the pair broke out of the sideways channel, where it had spent two weeks, but this does not mean that the downward movement will be strong and stable. There are quite a lot of macro data this week, so the euro might also receive some support from time to time. However, in general, we expect the pair to fall.
On August 16, traders should pay attention to the following key levels: 1.0762, 1.0806, 1.0868, 1.0943, 1.1043, 1.1092, 1.1137, 1.1185, 1.1274, as well as the Senkou Span B line (1.0980) and the Kijun-sen line (1.0968). The lines of the Ichimoku indicator can move during the day, which should be taken into account when determining trading signals. There are support and resistance levels that can be used to lock in profits. Traders look for signals at rebounds and breakouts. It is recommended to set the Stop Loss orders at the breakeven level when the price moves in the right direction by 15 pips. This will protect against possible losses if the signal turns out to be false.
Today, the EU will publish reports that are quite important by “name” – GDP for the second quarter and industrial production. But in reality, they have extremely low chances of provoking a market reaction. Most likely, it will be weak or the market might not even react. The US will release an industrial production report and the minutes of the last Federal Reserve meeting. These are also secondary events that we don’t expect much from. The minutes will be published late in the evening and will not affect the pair’s movement during the day.
Description of the chart:
Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;
The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;
Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals;
Yellow lines are trend lines, trend channels, and any other technical patterns;
Indicator 1 on the COT charts is the net position size for each category of traders;
Indicator 2 on the COT charts is the net position size for the Non-commercial group.
The material has been provided by InstaForex Company – www.instaforex.com
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