EUR/USD 5-Minute Analysis
The EUR/USD currency pair continued its upward movement on Tuesday, following a trend that began on Monday. We have previously noted that a significant correction was developing on the daily timeframe, indicating that the euro could rise much higher for purely technical reasons. Donald Trump's actions on Monday added some complications by causing turmoil in the foreign exchange market. However, despite this, the daily technical picture remained unchanged, suggesting that we can still anticipate upward movement. The only remaining question is whether we should trade this movement if it is merely a correction.
As highlighted, on the daily timeframe, this is a correction, while on the hourly timeframe, it appears as a series of alternating trends. The pair could break above the Senkou Span B line and the downtrend line as soon as today. Ironically, this could be followed by a downward correction, after which the primary upward trend might resume. On Tuesday, only one macroeconomic report was published, and it supported the euro, aligning with the current technical setup. The JOLTs report on job openings is not a highly significant release, but since the market is currently inclined to buy the pair, it reacted positively to the data.
Unfortunately, trading signals on Tuesday were far from ideal. During the Asian session, the pair fell 75 pips but missed the 1.0269 level by just 4 pips. There were exactly 4 pips missing to open an excellent long position. Later, the price rebounded off a critical line, but this signal turned out to be false. Moreover, it should not have been traded because the Stop Loss for this trade would have needed to be set above the Senkou Span B line. Ultimately, the pair got stuck in the 1.0340-1.0397 range.
COT Report
The latest COT report is dated January 28. The chart clearly shows that the net position of non-commercial traders remained bullish for an extended period; however, bears have now gained the upper hand. Two months ago, professional traders sharply increased the number of short positions, causing the net position to turn negative for the first time in a long time. This shift indicates that the euro is being sold more frequently than it is being bought.
Currently, there are no fundamental factors supporting the euro's strength. The recent upward movement of the euro on the weekly timeframe is barely noticeable and can be seen as just a simple pullback. While the pair may correct for a few more weeks, this does not change the 16-year downtrend.
At present, the red and blue lines have crossed and changed their relative positions, indicating a bearish trend in the market. Over the last reporting week, the number of long positions in the non-commercial group decreased by 14,000, while short positions fell by 9,900. As a result, the net position decreased by another 4,100 contracts.
EUR/USD 1-Hour Analysis
On the hourly timeframe, the pair has completed a local uptrend and formed a new downtrend line. We expect the decline to continue in the medium term, as the Federal Reserve is anticipated to cut rates only 1-2 times in 2025, indicating a more hawkish stance than the market had expected. Moreover, Trump's tariffs could lead to a spike in U.S. inflation, prompting the Fed to adopt an even more hawkish approach throughout the year. However, in the short term, we may still observe one or two more uptrends.
For February 5, we recommend monitoring the following trading levels: 1.0124, 1.0195, 1.0269, 1.0340-1.0366, 1.0461, 1.0524, 1.0585, 1.0658-1.0669, 1.0757, 1.0797, and 1.0843. Additionally, pay attention to the Senkou Span B line (1.0400) and the Kijun-sen (1.0340). Please note that the Ichimoku indicator lines may shift throughout the day, so keep this in mind when identifying trading signals. If the price moves 15 pips in the right direction, don't forget to adjust the Stop Loss to breakeven, which will help protect against potential losses if the signal turns out to be false.
On Wednesday, the Eurozone is scheduled to release service sector PMI indexes. Similarly, the key ISM report will also be published in the U.S., alongside the ADP report on private-sector employment. We believe that the market will continue to favor buying the pair, so any positive reports for the euro could have an amplified impact.
Illustration Explanations:
- Support and Resistance Levels (thick red lines): Thick red lines indicate where movement may come to an end. Please note that these lines are not sources of trading signals.
- Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. These are strong lines.
- Extreme Levels (thin red lines): Thin red lines where the price has previously bounced. These serve as sources of trading signals.
- Yellow Lines: Trendlines, trend channels, or any other technical patterns.
- Indicator 1 on COT Charts: Represents the net position size for each category of traders.
