The EUR/USD currency pair rose on Wednesday but has struggled to find a clear direction for almost two weeks now. However, it's probably unfair to blame the market or the EUR/USD pair for this situation. Traders once again find themselves at the mercy of the geopolitical news flow, which changes its direction almost daily. In the first three days of this week, news pointed to an escalation in the conflict in the Middle East multiple times and to the proximity of negotiations, ceasefires, and agreements several times. Yesterday, information surfaced that Iran is ready to conclude a deal, but no one specified the conditions or whether they align with US proposals. Concurrently, in the US, there were further announcements about the closeness of an agreement, though it is preliminary and intended to end hostilities and facilitate negotiations in a calmer setting. We cannot know how true this information is, and trusting Donald Trump is not advisable. Nonetheless, the market reacted positively with dollar sales.
On the hourly timeframe, the uptrend has ended, but the downtrend has not yet begun. Currently, we believe the market is in a range between 1.1666 and 1.1760, although prices have exceeded this range twice. However, market movements once again depend on geopolitics, so any further direction (at least on Thursday) will hinge on it.
On the 5-minute timeframe, two trading signals were generated yesterday. During the Asian trading session, the pair crossed the Kijun-sen line, and in the European session, it surpassed the 1.1750-1.1760 area. Traders could have opened long positions at the start of the European session. After the return to the 1.1750-1.1760 area, buy positions could have been closed.
The latest COT report is dated April 28. The weekly timeframe illustration clearly shows that the net position of non-commercial traders remains "bullish," but is rapidly declining amid geopolitical events. Traders have been shedding the euro in favor of the US dollar in recent months. Trump's policies haven't changed, but the dollar has temporarily served as a "reserve currency." However, this process may already be behind us.
We still do not see any fundamental factors supporting the strengthening of the euro, while there are sufficient factors for the US dollar to fall. The war in the Middle East temporarily made the dollar extremely attractive, but when this factor reaches its "expiration date," everything will revert to previous patterns. And it may have already expired. In the long term, the euro could decline to the level of $1.06 (the trend line), but the upward trend will still be relevant. At the moment, the pair hasn't strayed far from the descending trend line, which has been breached several times.
The positioning of the red and blue lines indicates parity between bulls and bears. During the last reporting week, the number of longs among the "Non-commercial" group decreased by 300, while shorts increased by 5,300. Consequently, the net position fell by 5,600 contracts over the week.
On the hourly timeframe, the EUR/USD pair continues to form a downward trend, but we have actually been observing a range since April 21. The situation in the Middle East remains tense but is not worsening, so there are currently few substantial reasons for the US dollar to strengthen. Technically, the dollar is in a better position than the euro, but this advantage has not been realized last week and is not happening this week either.
For May 7, we highlight the following trading levels: 1.1362, 1.1426, 1.1542, 1.1615-1.1625, 1.1657-1.1666, 1.1750-1.1760, 1.1830-1.1837, and 1.1907-1.1922, as well as the Senkou Span B line (1.1758) and the Kijun-sen (1.1720). The Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals. Don't forget to set a Stop Loss order to break even if the price moves in the right direction by 15 pips. This will protect against potential losses if the signal turns out to be false.
On Thursday, no important events or reports are scheduled in the Eurozone and the US. Thus, during the day, we can only hope for new geopolitical news, which we do not doubt will arrive.
Today, traders can open short positions if the price consolidates below the 1.1750-1.1760 area, targeting 1.1720 and the 1.1657-1.1666 area. Long positions can be initiated if the price consolidates above the area of 1.1750-1.1760, targeting 1.1830-1.1837.
*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.
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