Analysis of EUR/USD 5M

EUR/USD showed bullish bias on Friday. This time, the market had a logical reason to sell the U.S. dollar, but the euro did not have any good reason to justify its growth from Monday to Thursday. We should start with the Eurozone data. Early in the morning, Germany released its industrial production report for January, unexpectedly showing a growth of 1%. A few hours later, the final estimate of the Eurozone GDP for the fourth quarter was released, which, as expected, remained at 0%. Therefore, the European economy has not been growing for five consecutive quarters, which brings the first rate cut closer.

If we overlook the German industrial output data (which is still a secondary indicator), there was no positive information that could support the euro. This aligns with the type of movements that we observed during the first half of the day when the pair remained relatively unchanged. In the second half of the day, objectively weak data on the US labor market and unemployment were released, which exerted pressure on the dollar. However, by the end of the day, the quotes returned to their original positions. In general, the market had the opportunity to sell the dollar, but it did not take advantage of this opportunity on Friday.

Speaking of trading signals, it's difficult to identify them on the 5-minute timeframe. In general, a signal was generated at the beginning of the U.S. session when the price "bounced off" the level of 1.0935. However, the U.S. data was released at the same time, making it risky to open trades during the release of important data. In any case, the price did not reach the target level of 1.1006.

COT report:

The latest COT report is dated March 5. The net position of non-commercial traders has been persistently bullish for quite some time. Basically, the number of long positions in the market is higher than the number of short positions. However, at the same time, the net position of non-commercial traders has been decreasing in recent months, while that of commercial traders has been increasing. This shows that market sentiment is turning bearish, as speculators are increasing the volume of short positions on the euro. We don't see any fundamental factors that can support the euro's growth in the long term, while technical analysis also points to the formation of a downtrend.

We have already drawn your attention to the fact that the red and blue lines have significantly diverged, often preceding the end of a trend. Currently, these lines are moving towards each other (indicating a trend reversal). Therefore, we believe that the euro will fall further. During the last reporting week, the number of long positions for the non-commercial group decreased by 5,200, while the number of short positions decreased by 8,600. Accordingly, the net position increased by 3,400, which is relatively small. The number of buy contracts is still higher than the number of sell contracts among non-commercial traders by 66,000 (previously 63,000). Thus, commercial traders continue to sell the euro.

Analysis of EUR/USD 1H

On the 1-hour chart, the uptrend remains intact, and EUR/USD has left the sideways channel of 1.0792-1.0889. In our opinion, all the factors currently suggest that the dollar will strengthen, but the market is still buying the euro for no apparent reason. Therefore, we expect the price to consolidate below the Senkou Span B line and the euro to resume the downward movement, but at the moment, there are no sell signals. The euro will continue to correct higher.

On March 11, we highlight the following levels for trading: 1.0530, 1.0581, 1.0658-1.0669, 1.0757, 1.0823, 1.0889, 1.0935, 1.1006, 1.1092, as well as the Senkou Span B line (1.0840) and the Kijun-sen line (1.0911). The Ichimoku indicator lines can move during the day, so this should be taken into account when identifying trading signals. Don't forget to set a Stop Loss to breakeven if the price has moved in the intended direction by 15 pips. This will protect you against potential losses if the signal turns out to be false.

On Monday, there are no significant events lined up in the European Union and the United States. Most likely, we're in for another "quiet Monday". A correction after a five-day rise would be the most logical scenario, but logic is somewhat lacking in the pair's movements at the moment.

Description of the chart:

Support and resistance levels are thick red lines near which the trend may end. They do not provide trading signals;

The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, plotted to the 1H timeframe from the 4H one. They provide trading signals;

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 is the net position size for each category of traders;

Indicator 2 on the COT charts is the net position size for the Non-commercial group.