The EUR/USD pair perfectly worked out the resistance area of 1.1326–1.1342 in the hourly timeframe on July 6, which we previously designated as quite strong and is also an approximate upper line of the side channel in which the pair has been trading in for the last month. Thus, buyers showed that they do not have the strength to leave the side channel at the moment. After the price rebounds from the upper line, you can only expect a fall to the lower border, which runs around the level of $.12. Thus, in the current conditions, buyers need to overcome the area of 1.1326–1.1342 in order for the euro to continue to grow in price.
Both linear regression channels are directed upwards on a 15-minute timeframe, signaling an upward trend in the most short-term plan. However, the side channel and the pair rebounded off its upper line – a downward movement can already begin.
The COT report
The new COT report, which was released on Monday, showed that during the reporting week (June 24–30), professional traders were busy closing buy contracts and opening sell contracts. It is interesting that the European currency fell in price during this period of time, but not too much, not by -17,000 contracts in the net position. At the same time, from a technical point of view, the euro/dollar pair is now in a flat, which is clearly visible on the 4-hour timeframe and even higher. Thus, we cannot conclude that major market participants have completely abandoned euro purchases. It should also be noted that market participants who hedge their risks have closed contracts for sale in the reporting week with the same zeal, thus slightly offsetting the actions of speculators. In total, 8,500 Buy-contracts and 3,000 Sell-contracts were closed. Therefore, almost in any case, the euro should have fallen in price during the reporting week. But the future prospects of the euro are difficult to track on the COT report. All recent changes have not been trending.
The overall fundamental background for the EUR/USD pair was almost absent on Monday. Several business activity indices published in the US and retail sales in the European Union did not have a particularly strong impact on the pair's movement from our point of view. Moreover, since the side channel is clearly visible on the 4-hour timeframe, this means that such a trend is currently absent, although the European currency still has a certain advantage from a fundamental point of view. Thus, first of all, market participants need to overcome the level of 1.1353 (the Murray level "5/8" according to the linear regression channels system). Only then will it be possible to pay attention to fundamental events and macroeconomic reports again. In general, we believe that the foundation is now on the side of the euro, mainly due to the fact that the second wave of the coronavirus epidemic has begun in the United States, although we believe that this is an incomplete first wave. Thus, America may soon face new problems related to quarantine restrictions, which might affect the economy. In the European Union, in terms of coronavirus, everything is much calmer and there are few openly negative topics for the euro.
Based on all of the above, we have two trading ideas for July 7:
1) Buyers reached the 1.1326-1.1342 area for the third time in the last month and rebounded from it for the third time. Thus, we advise you to buy the euro but not before this area has been overcome with the goals of resistance levels 1.1362 and 1.1422. Potential Take Profit is up to 80 points.
2) Sellers are unable to return to the market today. To begin with, we expect the pair's quotes to fall to the two strong lines of the Ichimoku indicator - Senkou span B (1.1258) and Kijun-sen (1.1266). However, we do not advise you to trade the first stage of a new fall. It is better to wait until the support area of 1.1227–1.1243 has been overcome. And only then should you open short positions with the goals of 1.1186 and 1.1126. The potential Take Profit in this case is from 35 to 95 points.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
InstaForex analytical reviews will make you fully aware of market trends! Being an InstaForex client, you are provided with a large number of free services for efficient trading.