EUR/USD 1H
The euro/dollar pair rose for the third time to the level of 1.1430 on the hourly timeframe of July 20. This time, buyers managed to push this level, but the quotes failed to go far up. After it became clear that the EU summit could end in nothing, the fervor of the bulls noticeably decreased. As a result, we have a slightly paradoxical picture. On the one hand, we still have a pronounced upward trend, which is displayed by the ascending channel. On the other hand, the bulls push the pair up very reluctantly, with great difficulty. Each upward push is accompanied by an equally strong pullback or correction, which significantly complicates the process of trading the euro/dollar pair. Bears continue to rest, as they have nothing to do in the market before consolidating below the channel.
EUR/USD 15M
Both linear regression channels are directed upwards on the 15-minute timeframe, signaling an upward trend in the most short-term plan. At the end of last week, we assumed that professional traders continued to buy the euro, which will be reflected in the new COT report. In practice, and so it turned out. The "non-commercial" category of traders (the most important and significant) opened new 9,648 Buy-contracts, and a total of 3,719 Sell-contracts during the reporting week. Thus, the net position in the non-commercial category has grown again and now stands at 112,124. Recall that the net position reflects the mood of market participants. If it is positive, the mood is bullish. If it's negative, it is bearish. We have a strong bullish interest in the euro. The last working days of the past week also ended with the euro's growth, so the new COT report, which will be released at the end of this week, can also show an increase in the number of Buy-contracts among non-commercial traders.
The fundamental background for the EUR/USD pair remained unchanged on Monday. Important macroeconomic statistics were not published on this day, so traders, in fact, had nothing to react to during the day. However, the pair did not stand in one place. It grew in the first half of the day, and fell in the afternoon. We believe that such movements are still extremely difficult to work with, despite the fact that the upward trend continues. Moreover, traders are now at a crossroads. On the one hand, the dollar is under pressure from the situation with the epidemic in the United States, which may end very badly for the US economy. On the other hand, the European Union summit has been going on for four days and it is far from certain that the 27 EU member states will be able to reach a common denominator in the negotiations. We, of course, assume that the countries of the "frugal four" are not going to stand until the "bitter end" and wait for Charles Michel to abandon the idea of providing even 400 billion euros in grants to the most affected by the pandemic. This means that the parties can come to a consensus on this issue, but still, you will agree that it is likely that it will take another meeting of the EU leaders to come to a final agreement. And this factor may become bearish for the euro, at least for a while.
Based on all of the above, we have two trading ideas for July 21:
1) Buyers clearly continue to dominate the market, as quotes remain above the Kijun-sen line and inside the ascending channel. But at the same time, they move the pair up with great difficulty. Buy orders remain relevant with the target resistance levels of 1.1486 and 1.1544, but traders should be clearly aware of the risks of opening positions at this time, as the pair is constantly being corrected. The potential Take Profit in this case is from 40 to 100 points.
2) Bears are now simply resting and waiting for buyers to stop suffering with the euro. Sellers do not have enough power to form a new downward trend. Thus, we can only wait for the price to consolidate below the Kijun-sen line, and ideally - below the ascending channel, and only then trade down to the support level of 1.1242. The potential Take Profit in this case is about 80 points.
