Fundamental analysis

Outlook for EUR/USD on October 27. Trading signals. COT report. The euro showed strong growth ahead of the ECB meeting. What

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EUR/USD 5M

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The euro/dollar pair continued its upward movement on Wednesday, which was not justified by anything local and current. We understand that the results of the European Central Bank meeting will be summed up in the European Union today, and traders could well begin to work out in advance the results that will be announced today. In this case, the euro has already fully worked out the rate hike by 0.75%. It turns out that today it will be quite difficult to expect the euro’s succeeding growth, although anything can happen. However, after a two-day rise in the euro, which was not supported by any macroeconomic reports or a fundamental background, we believe that today the pair may fall seriously. Even if we ignore the ECB meeting, nothing has changed in the fundamental and geopolitical background, so the euro’s growth looks rather strange. However, we have a new upward trend line and the price is above the Ichimoku indicator lines.

In regards to yesterday’s trading signals, everything was ambiguous and I had to work hard to work them out correctly. The first buy signal was formed last night, when the price rebounded from the level of 0.9945. At the opening of the European session, the price moved only a few points away from the formation point, so the position could be opened. Subsequently, the price went up to the level of 1.0019 and overcame it. You could close longs and open shorts only when the price consolidated back below 1.0019. The profit was 50 points. The sell signal turned out to be a false one, so the short position took a 20 pip loss as the price rebounded above 1.0019. But this buy signal brought traders about 40 more points of profit, because the pair continued to rise and reached the next target level of 1.0072.

COT report:

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The euro Commitment of Traders (COT) reports for 2022 could be used as good examples. 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 and the euro is still dropping. 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 long non-commercial positions increased by 6,500, while the number of shorts decreased by 4,000. Accordingly, the net position increased by about 10,500. This fact is not of particular importance, since the euro still remains “at the bottom”. At this time, commercial traders still prefer the euro to the dollar. The number of longs is higher than the number of shorts for non-commercial traders by 48,000, but the euro cannot derive any dividends from this. Thus, the net position of the non-commercial group can continue to grow further, this does not change anything. If you look at the total open longs and shorts for all categories of traders, then shorts are 22,000 more (586,000 vs 564,000). Thus, according to this indicator, everything is logical.

We recommend to familiarize yourself with:

Overview of the EUR/USD pair. October 27. The euro’s groundless growth as a reason to think.

Overview of the GBP/USD pair. October 27. The pound sterling is flying high but could fall deep.

Forecast and trading signals for GBP/USD on October 27. Detailed analysis of the movement of the pair and trading transactions.

EUR/USD 1H

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You can see on the hourly timeframe that the pair continues to form a new upward trend. The growth is almost groundless, so we fear that everything could end in a new powerful fall. Moreover, today we have the ECB meeting and a speech by ECB President Christine Lagarde, and the market has already played out the most hawkish scenario. After a four-day growth, a technical correction is also needed. On Thursday, trading could be performed 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 (0.9754) and Kijun-sen (0.9900). Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. There are also additional support and resistance levels, but trading signals are not formed near them. 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. Today, in addition to the ECB meeting, the US will publish reports on GDP and orders for durable goods, which are also quite important. Therefore, the pair can “fly” from side to side.

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 – www.instaforex.com