Analysis of EUR/USD 5M

The EUR/USD currency pair continued to trade lower on Thursday. The downward movement was weak but stable. It seems as though the market, in no rush, continues to follow its course, confident in the inevitability of a prolonged war in the Middle East. Naturally, the macroeconomic backdrop had no bearing on the decline in the EUR/USD pair this time. Reports released over the past day did not unequivocally support the dollar. Similarly, central banks' monetary policy is currently of little significance. The movement of the pair is entirely dictated by the war in the Middle East, which is accumulating more details, forecasts, and conclusions daily. However, the mere fact of its continuation, along with the complete absence of any de-escalation, remains supportive of the U.S. dollar.

From a technical standpoint, the downward trend has not yet turned into an upward one. The Senkou Span B line has not been breached, and even the 1.1657-1.1666 area did not allow the euro to push higher. Thus, if geopolitical tensions remain this intense, the dollar could continue to rise, which contradicts the technical, fundamental, and macroeconomic outlook. In other words, geopolitics is currently paramount.

On the 5-minute timeframe, two trading signals were generated yesterday. During the European trading session, the pair bounced off the 1.1542 level and rose about 15 pips, enough to set a Stop Loss to breakeven, at which point the trade was closed. At the start of the American trading session, the pair breached 1.1542 and continued to decline until the end of the day. If traders closed their positions manually in the evening, they would have realized a profit of about 15 pips. The pair's decline may continue, but it is unlikely to turn into a crash without new geopolitical shocks.

COT Report

The latest COT report is dated March 3. The illustration on the weekly timeframe shows that the net position of non-commercial traders remains "bullish," and since Trump took office for a second time, the dollar has only been falling. We cannot definitively state that the decline of the U.S. currency will continue with 100% certainty, but current developments suggest this is a possibility.

We still see no fundamental factors that would strengthen the European currency, even amid the war in the Middle East. However, there are plenty of factors supporting the decline of the American dollar. The global downward trend still holds, but how significant is it now, given that the price has moved over the last 18 years? Since September 2022, a new upward trend has formed, breaking through the global descending trend line. Thus, the path further upward is open.

The positioning of the red and blue lines of the indicator continues to indicate a bullish trend. During the last reporting week, the number of longs for the "Non-commercial" group decreased by 300, while the number of shorts increased by 20,000. Consequently, the net position decreased by 20,300 contracts over the week.

Analysis of EUR/USD 1H

On the hourly timeframe, the EUR/USD pair continues its downward trend amid geopolitical events in the Middle East. The situation in the Middle East provided traders with hope at the beginning of the week, but it has once again reverted to the realities of war and mutual threats. The dollar has not yet updated its annual highs, but given these developments, it may do so in the near future.

For March 13, 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, 1.1907-1.1922, 1.1971-1.1988, as well as the Senkou Span B line (1.1670) and the Kijun-sen line (1.1586). The lines of the Ichimoku indicator may shift during the day, which should be taken into account when determining trading signals. Don't forget to set a Stop Loss at breakeven if the price moves in the correct direction by 15 pips. This will protect against potential losses if the signal proves to be false.

On Friday, the Eurozone is set to release industrial production data, while the U.S. will publish a series of reports, including the core PCE, durable goods orders, the GDP for the fourth quarter (second estimate), the JOLTs report on job openings, and the consumer sentiment index from the University of Michigan. These data are significant enough that the market is likely to react to them, at least to some extent.

Trading Recommendations:

On Friday, traders may continue to hold short positions after consolidating below the level of 1.1542, targeting 1.1426. Long positions can be considered if the price consolidates above the level of 1.1542, with targets set at 1.1615-1.1625 and 1.1657-1.1666.

Explanations for the Illustrations:

• Price levels of support and resistance – thick red lines, around which movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B lines – lines from the Ichimoku indicator transferred to the hourly timeframe from the 4-hour timeframe. They represent strong lines.
• Extreme levels – thin red lines from which the price previously bounced. They are sources of trading signals.
• Yellow lines – trend lines, trend channels, and any other technical patterns.
• Indicator 1 on the COT charts – the size of the net position for each category of traders.