Analysis Of EUR/USD 5M

The EUR/USD currency pair sharply declined on Thursday, closing the day near the Ichimoku indicator lines, which had nearly merged. The situation with the EUR/USD pair is simply terrible. The price changes direction almost every one or two days, and the market continues to trade solely based on geopolitical news and events, rendering all macroeconomic reports and fundamental events meaningless. Traders do not acknowledge technical factors, lines, levels, and trends. Thus, we are witnessing completely random movements that no one can forecast. No one knows when and, more importantly, what Donald Trump will say next.

It is pointless to analyze the technical picture on the hourly timeframe. Last week, the price broke through the ascending trendline, fell for a while, then rose again, and is now falling again. One might assume the market is in a range, but it is not. Such movements are truly a reaction of the market to the ever-changing geopolitical events. To be precise, Trump's rhetoric changes three times during a single speech, and the market continues to respond to that.

Yesterday, two trading signals formed on the 5-minute timeframe, which could even be disregarded given the nature of recent movements. We believed until the end that the market would stop reacting to Trump's contradictory statements, but it seems we were wrong. The market now only reacts to genuinely significant events and reports.

COT Report

The last COT report is dated March 24. The weekly chart clearly shows that the net position of non-commercial traders remains "bullish" but is rapidly declining due to geopolitical events. Traders are mass selling the European currency in favor of the US dollar. Trump's policy has not changed, but the dollar is once again acting as a "reserve currency," which is attracting a significant influx of buyers.

We still do not see any fundamental factors that would strengthen the European currency. However, there are sufficient factors for the decline of the dollar. The war in the Middle East has made the dollar temporarily super-attractive, but when this factor expires, everything may return to the way it was. In the long term, the euro could fall to as low as 1.06 (the trend line), but the upward trend will still remain relevant.

The positioning of the red and blue lines of the indicator continues to indicate the preservation of the "bullish" trend. During the last reporting week, the number of longs in the "Non-commercial" group decreased by 12,800, while the number of shorts decreased by 1,000. Consequently, the net position declined by 11,800 contracts over the week.

Analysis Of EUR/USD 1H

On the hourly timeframe, the EUR/USD pair has changed direction again. The new escalation in the Middle East could again shift traders' trading priorities, so any rise should be approached with caution. Trump's speeches continue to regularly provoke market reactions, typically in opposite directions.

On April 3, we highlight the following trading levels – 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 (1.1542) and Kijun-sen line (1.1536). The lines of the Ichimoku indicator may move throughout the day, which should be considered when determining trading signals. Don't forget to set a stop-loss order at breakeven if the price moves in the correct direction by 15 pips. This will protect against potential losses if the signal turns out to be false.

On Friday, there are no important events or reports scheduled in the European Union, while in the US, important Non-Farm Payroll reports and unemployment figures will be released. Normally, traders would pay close attention to these reports, but we are not sure that a reaction will follow this time. We do not know when Trump will next choose to address the markets. For traders, geopolitics remains the top priority.

Trading Recommendations:

On Friday, traders may consider short positions if the price consolidates below the Ichimoku indicator lines, targeting 1.1444. Long positions can be opened with a target of 1.1615-1.1625 if the price bounces off the Ichimoku indicator lines.

Explanations For Illustrations:

• Support and resistance price levels – thick red lines around which movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B lines – lines of the Ichimoku indicator transferred from the 4-hour timeframe to the hourly timeframe. They are 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 COT charts – the size of the net position for each category of traders.