empty
02.04.2023 07:34 AM
EUR/USD. Analysis for the trading week of March 27–31. COT report. A boring week and a report on European inflation

Long-term outlook.

This image is no longer relevant

The EUR/USD currency pair has been trading higher for the majority of this week, only slightly moving back down on Friday. The unjustified growth of the European currency was frequently mentioned in our daily articles. Now take a look at the 24-hour TF. The complete most recent growth, which totals about 400 points, fits perfectly within the definition of "swing." Or a wide flat. Recently, the market has tried twice to break through the 50.0% Fibonacci level but failed. Near this level, the upward movement's penultimate round also came to a stop. In recent months, the long-term value of the pound sterling has also remained unchanged. Thus, several conclusions can be drawn. First off, there is a strong likelihood that both main pairs will move into a long-term flat. Before the consolidation phase started, we anticipated a stronger downward correction, but the market appears to have made a different decision and started consolidating right away. Second, from a basic standpoint, the recent increases in the value of the euro and the pound are unjustified; however, from a technical standpoint, everything is in order. Now, a rebound off the 50.0% mark might result in a decline to 1.0530, and such a movement might also appear irrational. The pair, however, does not require compelling reasons to move from one of its borders to another if it is trading in a side channel.

Only the report on inflation in the European Union can be highlighted as one of the significant events from last week. Experts predicted that the consumer price index would decline to 7.1–7.4% y/y, but it decreased to 6.9%. Since a value of 8.5% was reported in February, this is a significant slowdown. Inflation decreased by 1.6% in one month, which is a significant amount. If the euro calmly grew on Thursday in response to a similar report on German inflation, which was very strange, then traders on Friday could no longer ignore the fact that the likelihood of an ECB rate increase of 0.5% in May had significantly decreased. The European currency also has fewer and fewer opportunities for growth as inflation declines.

COT evaluation.

A new COT report for March 28 was made public on Friday. The CFTC has made up for lost time and is currently releasing reports that cover the most recent time frame. The image has accurately reflected market trends over the past few months. The aforementioned illustration unequivocally demonstrates that since the start of September 2022, the net position for major players (the second indicator) has been improving. Around the same period, the value of the euro started to increase. Both the position of the European currency, which is typically unable to adjust downwards, and the net position of non-commercial traders are currently "bullish" and stay at very high levels. The fact that a relatively high value of the "net position" enables us to allow the upward trend to end quickly has already been brought to the traders' attention. The first indicator, which frequently occurs before the trend's conclusion and shows that the red and green lines are very far apart from one another, signals this. The European currency attempted to begin dropping, but so far it has only experienced an ordinary pullback. The number of buy contracts from the "non-commercial" group rose by 7.1 thousand during the most recent reporting week, while the number of short positions decreased by 6.9 thousand. The net situation hasn't changed much as a result. For non-commercial traders, there are 145 thousand more buy futures than sell contracts. A correction is still in the works, so even in the absence of COT reports, the pair should continue falling.

Analysis of significant events.

There are only two events that can be remembered in addition to the EU inflation report. The infamous report on German inflation, which saw the euro continue to rise despite expectations of a fall, and the report on unemployment in the EU, which came in at 6.6%. These reports, however, can hardly be considered significant. The European Union's core inflation indicator, which rose once again to 5.7%, was much more significant. It comes out that in March, the primary measure of inflation decreased by 1.6% while the base measure rose by 0.1%. In the context of the key rate, the fundamental indicator is more significant. The likelihood of the ECB strengthening its monetary policy continues to rise as it gets stronger. However, there is no consensus on this. It is also impossible to ignore the reality that overall inflation is declining. In general, even on Friday, the euro could increase, but the 50.0% Fibonacci level and the likelihood that the pair will remain flat on the 24-hour TF both worked.

Here is our trading strategy for the week of April 3–7.

1) In the 24-hour timeframe, the pair has consolidated above the Ichimoku indicator's lines, but we cannot say that the upward trend has started up again. Although the market has recently been unable to determine what to do with the pair, we still think sales are expedient. We might witness a round of declining movement within the parameters of a "swing" or flat as early as next week. As a result, purchases can be contemplated either near the 1.0530 level or after surpassing the 50.0% Fibonacci level.

2) Given that the pair is close to its most recent local maximum, from which two rebounds have already taken place, we can now contemplate the beginning of sales of the euro/dollar pair. Now there is a good chance that the price will drop to 1.0530 or even less. The upward trend that has been actively forming over the previous six months has yet to result in any compelling reasons, in our opinion.

Explanations for the illustrations: Fibonacci levels, which serve as targets for the beginning of purchases or sales, and price levels of support and resistance (resistance/support). Take Profit levels may be close by.

Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5).

The net position size of each trading group is represented by indicator 1 on the COT charts.

The net position amount for the "non-commercial" group is represented by indicator 2 on the COT charts.

Paolo Greco,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

USD/JPY. Analysis and Forecast

The bulls of the Japanese yen have not been significantly affected by the disappointing GDP report for Japan's first quarter. This is largely due to growing expectations that the Bank

Irina Yanina 18:38 2025-05-16 UTC+2

XAU/USD. Analysis and Forecast

Gold is experiencing renewed intraday pressure, falling below the key psychological level of $3200 during the first half of the European session on Friday. Optimism surrounding the trade truce between

Irina Yanina 18:37 2025-05-16 UTC+2

Market gets lost in crowd

Investors are so confident that Donald Trump is following the stock market's lead that the S&P 500 no longer needs a reason to rise. The broad equity index had been

Marek Petkovich 11:40 2025-05-16 UTC+2

Japan on the Brink of Recession

The GDP report published on Thursday revealed that Japan's economy contracted by 0.7% year-over-year in the first quarter—its first annual decline in the past year and significantly worse than expected

Kuvat Raharjo 11:00 2025-05-16 UTC+2

Investors Continue Digesting the Impact of the Tariff Truce Between the U.S. and China (There Is a Chance of Renewed Corrective Decline in Gold and Oil Prices)

Markets have fully priced in the outcome of the U.S.–China talks, which resulted in a 90-day trade truce. Weaker-than-expected U.S. economic data offset the early-week optimism. The recent rally lost

Pati Gani 10:49 2025-05-16 UTC+2

What to Pay Attention to on May 16? A Breakdown of Fundamental Events for Beginners

Few macroeconomic events are scheduled for Friday, and they are not more significant than the reports released on Thursday, which did not provoke any market reaction. In essence, the only

Paolo Greco 06:17 2025-05-16 UTC+2

GBP/USD Overview – May 16: The Market Has No Desire to Sell

The GBP/USD currency pair traded sideways on Thursday with low volatility—typical behavior for the pound over the past month. First, there was a classic flat range; now, we see "swings"

Paolo Greco 03:54 2025-05-16 UTC+2

EUR/USD Overview – May 16: The Dollar Remains the World's "Number One Currency"

The EUR/USD currency pair moved in both directions on Thursday but ultimately remained below the moving average line. Its position beneath the moving average allows us to expect further strengthening

Paolo Greco 03:54 2025-05-16 UTC+2

Are Things Really So Optimistic with the Deals with China and the UK?

Last week, Donald Trump announced the signing of the first deal with the United Kingdom under his "America's Liberation" campaign. It was later revealed that the deal had not been

Chin Zhao 00:40 2025-05-16 UTC+2

The Euro Didn't End Up in the Junkyard

Chinese goods have flooded the European market, but EUR/USD bulls aren't alarmed by this. While the U.S. has reduced tariffs on imports from China, the weighted average tariff still sits

Marek Petkovich 00:39 2025-05-16 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.