Fundamental analysis

Outlook and trading signals for EUR/USD on November 3. COT report. Analysis of market situation. Euro is at a crossroads.

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Analysis of EUR/USD, 5-minute chart


The euro/dollar pair continued its corrective movement within the uptrend, which after four days of falling is still preserved. Recall that we do not consider the movements that took place last night and tonight, since the reaction to the results of the FOMC meeting can be observed within 24 hours quite freely. Therefore, we consider it right to analyze afterwards. At the moment, we can say that the upward trend is still preserved for the euro, as evidenced by the rising trend line. Settling below it will break the current trend, but it should be understood that a breakthrough, which will happen on a strong fundamental background, may be false. One way or another, conclusions will need to be drawn no earlier than tonight. Yesterday, in fact, the only more or less important report of the day – from ADP – was ignored. Weak volatility and almost complete absence of trend movement were observed throughout the day. The dollar only started to rise in price sluggishly during the US session.

In regards to Wednesday’s trading signals, the situation was difficult due to the flat. Traders could try to work out the first two signals near the Senkou Span B line, but both turned out to be false, after which all subsequent signals should have been ignored. In total, five signals were formed near the Senkou Span B line – this is a clear sign of a flat. The fall began only after the fifth signal.

COT report


In 2022, the Commitment of Traders (COT) report for the euro is becoming more and more interesting. In the first part of the year, the reports were pointing to the bullish sentiment among professional traders. However, the euro was confidently losing value. Then, for several months, reports were reflecting bearish sentiment and the euro was also falling. Now, the net position of non-commercial traders is bullish again. The euro managed to rise above its 20-year low, adding 500 pips. This could be explained by the high demand for the US dollar amid the difficult geopolitical situation in the world. Even if demand for the euro is rising, high demand for the greenback prevents the euro from growing. In the given period, the number of short orders initiated by non-commercial traders increased by 24,000, whereas the number of long orders declined by 2,700. As a result, the net position increased by 26,700 contracts. However, this could hardly affect the situation since the euro is still at the bottom. At the moment, professional traders still prefer the greenback to the euro. The number of buy orders exceeds the number of sell orders by 75,000. However, the euro cannot benefit from the situation. Thus, the net position of non-commercial traders may go on rising without changing the market situation. Among all categories of traders, the number of long positions exceeds the number of short positions by 19,000 (609,000 against 590,000).

Analysis of EUR/USD, 1-hour chart


The pair is moving upwards on the one-hour chart, but today it could stop. The price is around 70 points from the trend line, so it will not be difficult to overcome it. Especially when there is such a strong fundamental background, like what we have for tonight. No matter how the pair moved last night, high volatility and strong movements can continue to be observed today and tomorrow. Recall that the most important statistics will be released on Friday. And today the market may continue to work out the results of the Federal Reserve meeting. On Thursday, the pair may trade at the following levels: 0.9635, 0.9747, 0.9844, 0.9945, 1.0019, 1.0072, 1.0124, 1.0195, 1.0269, as well as the Senkou Span B (0.9900) and Kijun-sen (0.9955). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don’t forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. The EU will release a report on unemployment – not the most important indicator, we do not expect the market to react to it. Two business activity indices in the service sector will be released in America – ISM and S&P. Naturally, the ISM index is much more important for traders, and they could react to it.

What we see on the trading charts:

Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.

The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.

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 reflects the net position size of each category of traders.

Indicator 2 on the COT charts reflects the net position size for the non-commercial group.

The material has been provided by InstaForex Company –