EUR/USD. February 21. Analysis of COT reports for the euro over the last 5 weeks

EUR/USD – 4H.

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Hello, traders! Graphical analysis on the 4 charts warns of the approaching reversal of the pair in favor of the European currency. In this review, I suggest analyzing the report on Commitments of Traders to understand what is happening now in the market and what sentiments prevail among the major players.

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So, the first thing I would like to draw to your attention is the completely different moods in the non-commercial and commercial categories in the part of the changes table. Let me remind you that non-commercial is large market players who trade currency for a profit and commercial is a variety of companies that buy currency not for profit due to exchange rate differences. So, in the last three weeks before February 11, non-commercial actively increased short positions and reduced long positions. At the same time, the commercial category was increasing its long positions, getting rid of short positions. First, this means that sooner or later the non-commercial category will close positions to lock in profits. In contrast to the commercial category, which uses its futures and options for a particular currency to hedge against future strong price changes. It is the reset of short positions by the first category that will mean a reversal of the trend in favor of the euro.

Let’s also pay attention to the upper part of the table. Reflecting the total number of positions for different categories of players. In the last report dated February 11, the non-commercial category was dominated by short positions with a strong margin, while the commercial category was dominated by long positions. However, the total number of long positions was less than short: 575403 contracts against 607290. The gap in comparison with the previous month did not increase much, so the euro continued to fall at the usual pace. A new COT report for February 18 will be released today, which is likely to show a reduction in the total number of short positions.

Terms:

Non-commercial – major market players: banks, hedge funds, investment funds, private, and large investors.

Commercial – commercial enterprises, firms, banks, corporations, companies that buy currency to ensure current activities or export-import operations.

Non-reportable position – small traders who do not have a significant impact on the price.

The material has been provided by InstaForex Company – www.instaforex.com

Market review. Trading ideas. Q&A

Trading recommendations:USDCAD – buy is to 1.33500 level.EURCHF – buy through opening limit orders below 1.06.The material has been provided by InstaForex Company – www.instaforex.com

Trading plan for GBP/USD for February 21st, 2020

Technical outlook:The GBP/USD corrective drop might have finally found some support around the 1.2850 level. Please note that a minimum requirement for the correction to complete was a drop below the 1.2900 level. Also, 1.2850 was the termination point…

Trading plan for EUR/USD for February 21st, 2020

Technical outlook:EUR/USD has been giving in to bears for the last 13 trading sessions from February 3rd, 2020. The entire drop from 1.1240 through 1.0780 can be the last leg within the ending diagonal structure on a larger time frame. Please note that…

The euro saw a ray of light

Optimistic statements by ECB Vice-President Luis de Guindos noted that a strong labor market and low interest rates can support economic growth in the eurozone. The acceleration of European business activity from 51.3 to 51.6 in February became a kind …

Trading recommendations for EUR USD pair on February 21

From a comprehensive analysis, we see a flat with variable boundaries of 1.0782/1.0820. Now, about the details. The downward movement that was set at the beginning of the year managed to lower the rate of the single currency by more than 440 points. Moreover, since the beginning of February, the movement has been inertial at all. Such vivid stability leads to overheating of short positions and the lack of proper corrections can disrupt that stability. The market is emerging from this difficult situation with the help of accumulations and variable flat, where a horizontal movement of 60 hours is currently observed, which is not a small fluctuation in terms of time weight.

Regarding the theory of downward development, we see a kind of synchronicity, where a fellow GBP/USD market has a similar development in itself with one exception – that it is just beginning the recovery process. While on the EURUSD pair, we are already storming the psychological ranges. It turns out that we have a positive correlation and there is a chance of an additional incentive when trading moves interact. Regarding the development of the euro/dollar pair, we are faced with a 50% range level 1.0700//1.0775//1.0850 and the existing flat was formed near it. The main focal point remains the level of 1.0700 and only its breakdown would give a further turn to the new psychological range. To better understand the psychological ranges, I advise you to analyze the period of 2015-2017.

In terms of volatility, we see that the activity of the previous day increased by 48% compared to the day before, which we expected due to the regularity – a sharp slowdown (29 points) -> acceleration (43 points).

Analyzing the past day by the minute, we see a V-shaped formation (15:15-18:15 time on the trading terminal) inside the flat movement of 1.0782/1.0820. The subsequent fluctuation was in terms of price concentration near the lower end of the range.

As discussed in the previous review, the majority of traders are working on the downside, which corresponds to the general background of the market, as well as the characteristic FOMO syndrome (lost profit syndrome).

Looking at the trading chart in general terms (the daily period), we see a significant downward movement that develops in the area of April 2017. We have about 460 points left to the 17-year low, which does not seem such a long distance but the psychological pressure is enormous.

The news background of the previous day included data on applications for unemployment benefits in the United States, where the total increase was 25,000: Primary +4,000; Repeated +21,000.

The market reaction to the negative data on the US was in terms of a local weakening of the dollar, and then within the flat. The US currency has remained on the horseback, although the overheating of short positions is significant.

In terms of the general information background, we have the start of an emergency EU summit, where the burning issue of the seven-year EU budget was discussed. The first day ended with literally nothing, as everyone was faced with a disagreement – who and how much would contribute to the community treasury?

Members of the European Union can be understood since they lost a lot in the face of the United Kingdom, which gave more than 11 billion euros a year to the budget. And now, a hole in the seven-year budget is the size of a small country.

As we understand it, Germany is not ready to cover all costs and is trying to shift responsibility to all members of the community. Thus, there are conflicts of interest.

This is the end of the first day of the summit. Everything will continue on Friday but there will be no results.

Details: The budget for 2021-2027 assumes funding at the level of €1.087 trillion for the entire seven-year period at constant prices in 2018. The total payments of all countries to the EU budget for the final seven-year period 2014-2020 were planned at the level of €908.4 billion in constant prices in 2011.

Today, in terms of the economic calendar, we had data on inflation in Europe, where there was an increase from 1.3% to 1.4%. An hour before the publication of inflation data, preliminary PMI figures were released, which were slightly better than forecasts. There was an increase in the PMI data and inflation expectations, then a descent on the coincidences of the inflation expectations. In the second half of the day, similar PMI data will be released. However, in the United States, nothing positive is expected but if you refer to the fact that the dollar is now ignoring bad data, then there is a chance of holding positions.

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The upcoming trading week in terms of the economic calendar is quite measured and the only day that may interest us is Thursday, where we are waiting for a package of statistics on the United States.

The most interesting events displayed below:

On Wednesday, February 26

USA 16:00 London time – new home sales (Jan): Prev -0.4% -> Forecast 1.5%

On Thursday, February 27

USA 14:30 London time – basic orders for durable goods

USA 14:30 London time – applications for unemployment benefits

USA 14:30 London time – preliminary GDP data: Prev. 2.1%

Further development

Analyzing the current trading chart, we see the movement in the same range as the day before. This is another signal that downward interest is now a priority. If market participants turn a blind eye to such a significant overheating of short positions, reflecting all this in a sideways course, then trading operations can be regrouped. I believe that the FOMO syndrome played an integral role here and it persists in the market, which may lead to a further descent towards the middle level (1.0775) and the main (1.0700).

Detailing the available period every minute, we see that the beginning of the European trading session was expressed as an upward movement due to the publication of statistical data. The subsequent oscillation was already in the plan of the reverse course, just at the moment of approaching the upper limit of the range.

In terms of the emotional mood of market participants, we see the high speculative interest that came with FOMO.

In turn, traders still consider the downward trend as the main prospect but it is worth considering that traders use the optimal risk for transactions. Thus, they are not afraid of a flat and technical correction.

It is likely to assume that the fluctuation within the flat 1.0782/1.0820 will persist, where you can build work on the method of breaking the frames with the entrance to the impulse candle.

If you are already trading for sale, then your path is directed towards the border of 1.0700 with a top-up below 1.0775. Local buy operations are considered in case of a technical correction. However, you need a reason and fix the price higher than 1.0820 with the output of a pulse candle.

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Based on the above information, we will output trading recommendations:

– Buy positions will be considered if the price is fixed higher than 1.0820, with the prospect of a move to 1.0850, a local transaction.

– Positions for sale are already held by medium-term traders. Intraday traders are waiting for a break of the mark of 1.0775, with a characteristic impulse.

Indicator analysis

Analyzing different sectors of timeframes (TF), we see that the indicators of technical instruments signal a multidirectional slip.

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Volatility for the week / Volatility Measurement: Month; Quarter; Year.

The volatility measurement reflects the average daily fluctuation from the calculation for the Month / Quarter / Year.

(February 21 was based on the time of publication of the article)

The volatility of the current time is 36 points, which is not bad in terms of dynamics for this period. It is likely to assume that volatility may still locally accelerate within the range but the main turn will come after the breakdown of the boundaries.

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Key levels

Resistance zones: 1.0850**; 1.0850**; 1.0879*; 1.0900/1,0950**;1.1000***; 1.1080**; 1.1180; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100.

Support zones: 1.0775*; 1.0700; 1.0500***; 1.0350**; 1.0000***.

* Periodic level

** Range level

*** Psychological level

***** The article is based on the principle of conducting a transaction, with daily adjustments.

The material has been provided by InstaForex Company – www.instaforex.com

Analysis and forecast for EUR/GBP on February 21, 2020

Hello!
Perhaps the main driver that affects the price dynamics of the euro/pound pair’s rate is still Brexit. More specifically, this is a deal on a trade agreement between the UK and the EU.
Optimism after the victory of the Conservative is fading. We…

EUR/USD: Euro still far from being completely defeated

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What happens on Forex in February is nothing but the surrender of the greenback’s main competitors. The EUR / USD pair fell to a 3-year bottom, the yen against the US dollar sank to a 2.5-year low, and GBP / USD fell below the base of the 29th figure.

The dollar bulls made a real feast, and technical analysts for USD are looking forward to the formation of a “golden cross” – the intersection of 50 and 200-day moving averages. This figure rose 13 times in the 21st century and signaled the strengthening of the American currency by an average of 2.5% over the next 40 days.

However, the strength of the dollar is only the other side of the coin. The decline in EUR / USD would not have been so swift if not for the weakness of the single European currency. Judging by the protocol from the ECB Governing Council meeting in January, the regulator believes that even a ceasefire in the Washington and Beijing trade war will have a negative impact on the eurozone economy since most of the trade tariffs introduced by the parties remain valid. Although production activity in the region has improved, it is still at a level that signals a decline. But the meeting of the Governing Council of the ECB took place at the end of January when investors were not so worried about the impact of coronavirus on the world economy as it is now.

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The European Central Bank notes that domestic demand is the main driving force for the GDP of the foreign exchange bloc, however, the decline in German consumer sentiment from GFK in March indicates that a reduction or cessation of production in China could lead to a complete stop in Germany, which will negatively affect the labor market countries and domestic demand.

The euro is getting cheaper not only against the US dollar but also against other competitors. It particularly lost about 2.7% of its value to the renminbi, and 2.2% to the franc. As a result, the trade-weighted exchange rate of the single European currency fell to the lowest level since April 2017. If only the ECB had managed to respond a little sooner to the criticism of the head of the White House, Donald Trump, about the competitive devaluation that the overly strong dollar is to blame. Hence, now it is becoming obvious that the weakness of the bulls is another reason for the peak of the main currency pair.

The situation for the euro is aggravated by the fact that there is practically nowhere to wait for help from it. The ECB’s monetary policy is already super soft, while fiscal stimulus cannot be counted on. After the UK’s separation from the EU, a hole of € 75 billion was formed in the alliance’s budget, and the region’s finance ministers do not yet know how to patch it. The rich countries in the bloc do not want to pay more, while the poor do not want to suffer losses due to the reduction of agricultural simulation programs. In general, this is a dead-end that does not bode well for the euro and strengthens the position of the Eurosceptics.

According to some experts, even despite the worst start since 2015, it is too early to call the fall of the euro a defeat.

They expect greater weakness of the single European currency. This is because the factors that pushed the euro to a 34-month low against the US dollar, such as carry trade, remain unchanged.

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According to analysts, even when the fears associated with the outbreak of coronavirus have subsided and the full economic impact of the epidemic on China will be taken into account in quotes, the euro can still feel the consequences of the desire for profitability and attractiveness of the dollar.

“The problem with the long position in the euro is that you need it to work a little for you before you start making money. Due to the negative carry, I am quite sure that there is no catalyst for an immediate EUR / USD reversal, “said Kieran Curtis of Aberdeen Asset Management.

Negative rates by the ECB and the regulator’s purchase of corporate bonds in the domestic market are forcing European investors to seek positive returns either through euro-denominated bonds issued by emerging market borrowers or in dollar assets. Since the difference in yield between US and German government bonds is almost 2%, this demand is unlikely to disappear soon.

“When you hedge your risks in euros using, say, a three-month rate, the other side will pay you. As soon as you add this profitability, you will get a higher total profitability in dollars, minus the cost of hedging,” Curtis noted.

And this dynamics is unlikely to change since the difference in the monetary rate of the American and European Central Banks seem to have fixed for a long time – for the next twelve months. According to the rates of traders, none of the regulators will be able to increase interest rates.

“Since the Fed has a significant easing of monetary policy, the dollar should retain a percentage advantage over the euro,” said Petr Krpata, an ING analyst.

“Given that the threat of the spread of coronavirus is still high, the full impact of the epidemic on the Chinese economy is not taken into account in quotes. From both a fundamental and a technical point of view, the euro may expect a weakening. It is still vulnerable, “said Anders Faergemann of Pinebridge Investments.

The material has been provided by InstaForex Company – www.instaforex.com

Technical analysis of GBP/USD for February 21, 2020

7Overview:Pivot : 1.2959.The GBP/USD pair faces resistance at 1.2959, while strong resistance is seen at 1.3020. Support is found at 1.2848 and 1.2810 levels.The GBP/USD pair continues to move downwards from 1.2959 level. The pair could fall from 1.2…