EUR/USD Analysis 5M

The EUR/USD currency pair finally showed strong growth on Thursday. During the day, the ECB meeting results were announced, which proved the least resonant of the three central bank meetings this week. The ECB did not hint at a possible tightening of monetary policy amid the acceleration of inflation driven by the conflict in the Middle East and rising oil and gas prices. Nevertheless, the euro's quotes soared. The reasons for such a strong rise are somewhat unclear, but we cannot call this movement illogical either. In recent weeks, the market has focused solely on one factor—the geopolitical—and has ignored all others, most of which pointed to a decline in the US dollar. Perhaps now is the time to restore fair valuation of the EUR/USD pair?

From a technical perspective, the pair broke through the descending trendline, retraced deeply after the Fed's hawkish meeting, and then surged upward, breaking the important Senkou Span B line. Thus, we have already seen two signs of the downward trend's completion on the hourly time frame. In our view, the dollar needs to return to the 20 level against the euro, as it has no support apart from geopolitics. Moreover, geopolitics is one thing, while fleeing from risks associated with geopolitics is something else.

On the 5-minute time frame, several trading signals of interest were formed yesterday. In the morning, the price bounced off the critical line but could not reach the nearest target. The trade closed at breakeven. Following that, consolidation above the Kijun-sen line allowed traders to open long positions. By the end of the day, the Senkou Span B line was worked out and then broken. Traders could have opened four trades, two of which closed at breakeven and two at profit.

COT Report

The latest COT report is dated March 10. The illustration on the weekly time frame clearly shows that the net position of non-commercial traders remains "bullish," while since Trump took office as president of the United States for the second time, only the dollar has been falling. In recent weeks, the American currency has strengthened due to geopolitical reasons, but the long-term upward trend remains intact.

We still do not see any fundamental factors that would strengthen the European currency. However, there are plenty of factors that could cause the American dollar to decline. The war in the Middle East made the dollar temporarily super-attractive, but once that factor expires, it remains an open question. In the long term, the euro could fall to 1.06 (the trendline), but the upward trend will remain relevant.

The positioning of the red and blue lines of the indicator continues to indicate a persistent "bullish" trend. Over the last reporting week, the number of longs in the "Non-commercial" group decreased by 28,900, while the number of shorts decreased by 2,500. Consequently, the net position decreased by 25,400 contracts over the week.

EUR/USD Analysis 1H

On the hourly time frame, the EUR/USD pair could have completed its downward trend this week, but there is currently no confidence in this. A new escalation in the Middle East, new shocks in the oil or gas market, and the expansion of the conflict beyond the Middle East could trigger a new wave of dollar purchases. The euro showed strong growth on Thursday, but is the market ready to start a new trend?

For March 20, we highlight the following levels for trading: 1.1234, 1.1274, 1.1362, 1.1426, 1.1542, 1.1615-1.1625, 1.1657-1.1666, 1.1750-1.1760, 1.1830-1.1837, as well as the Senkou Span B line (1.1538) and the Kijun-sen line (1.1486). The lines of the Ichimoku indicator may shift throughout the day, which should be taken into account when determining trading signals. Don't forget to set a Stop Loss order to break even if the price moves in the correct direction by 15 pips. This will protect you from potential losses if the signal turns out to be false.

On Friday, no significant events or reports are scheduled in the Eurozone or the US, providing traders with a good opportunity to assess whether yesterday's rise in the euro currency was a coincidence. Is it part of a new trend, or simply a temporary retracement before another decline?

Trading Recommendations:

On Friday, traders may consider short positions if the price consolidates below the Senkou Span B line, targeting 1.1486 and 1.1426. Long positions can remain open with targets in the area of 1.1615-1.1625, as the Senkou Span B line has been breached.

Explanations for Illustrations:

• Price levels of support and resistance (resistance/support) – thick red lines, around which movement may end. These are not sources of trading signals.
• Kijun-sen and Senkou Span B lines – lines from the Ichimoku indicator transferred to the hourly time frame from the 4-hour. These are strong lines.
• Extremum levels – thin red lines, from which the price has previously bounced. These 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 of each category of traders.