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On Monday, the EUR/USD currency pair continued its upward movement, which is purely corrective. We had been anticipating this correction recently, though it was unclear when it would start. Nonetheless, it was expected, and on the hourly time frame, that the first significant signal indicating a change in the local trend was the pair's consolidation above the descending trend line. This was the start of the upward movement that continues today. Expecting strong moves on Monday was challenging, yet the pair's growth was almost the only logical outcome. We had noted that Friday's illogical dollar rise could end quickly, given that the most crucial reports on the U.S. labor market and business activity had disappointed. On Monday, the market merely restored the fair rate.
Now, all eyes are on the Federal Reserve, which will announce the results of its meeting on Thursday, November 7. Given the weak labor market data, which remains a trend, even more dovish rhetoric from Fed Chair Jerome Powell and his colleagues can be expected. This suggests that with a high degree of probability, the U.S. dollar's decline will continue this week. However, we must remember that this week also brings the U.S. presidential election, an unpredictable event that could lead to a dollar rally. There is an ascending trend line, and unless the price consolidates below it, we should expect the pair to rise. Nonetheless, we do not anticipate strong growth.
There were several trading signals on Monday, but none were significant. Despite the pair's growth, there was almost no movement during the European and U.S. sessions, and all signals formed didn't yield profits. Most of the pair's rise was due to a gap at the opening and overnight growth, while a flat movement was observed during the day.
The latest COT report, dated October 29, shows that the net position of non-commercial traders has remained bullish for a long time, with the bears' latest attempt to gain control failing spectacularly. However, two weeks ago, the number of short positions opened by professional traders increased sharply, and the net position became negative for the first time in a long while. This indicates that the euro is now being sold more frequently than bought.
We still see no fundamental factors supporting the euro's strength, while technical analysis shows the price in a consolidation zone—essentially, a flat trend. Regarding the weekly time frame, it is clear that the pair has been trading between the 1.0448 and 1.1274 levels since December 2022. In other words, a seven-month flat has extended to 18 months, making further decline more likely—at least down to the 1.0448 level.
The red and blue lines have crossed and switched positions relative to each other. In the last reporting week, the number of longs in the non-commercial group rose by 6,100, while shorts increased by 27,900, reducing the net position by 21,800. There is still strong potential for the euro's decline.
The pair has started an upward correction within a downtrend on the hourly time frame. There is no need to discuss the fundamental and macroeconomic reasons for a new dollar decline, as none exist. In the medium term, we expect nothing but the fall of the euro. The short-term outlook involves correction, largely dependent on the Fed's meeting this week.
For November 5, the following trading levels are highlighted: 1.0658-1.0669, 1.0757, 1.0797, 1.0843, 1.0889, 1.0935, 1.1006, 1.1092, 1.1147, along with the Senkou Span B (1.0832) and Kijun-sen (1.0843) lines. The Ichimoku lines may shift throughout the day, so consider this when identifying trading signals. Remember to place a Stop Loss order at break even if the price moves 15 pips in the intended direction to protect against potential losses if the signal is false.
On Tuesday, European Central Bank President Christine Lagarde is scheduled to speak in the Eurozone, while the ISM Services PMI will be released in the U.S. Both events are crucial for the market. If the ISM index falls short of expectations, the dollar may decline.
Support and resistance levels: thick red lines around which movement may end. They are not sources of trading signals.
Kijun-sen and Senkou Span B lines: Ichimoku indicator lines transferred from the 4-hour to the 1-hour timeframe. These are strong lines.
Extreme levels: thin red lines where the price previously rebounded. They are sources of trading signals.
Yellow lines: Trend lines, trend channels, and other technical patterns.
Indicator 1 on COT charts: The net position size for each category of traders.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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