EUR/USD 5-Minute Analysis
On Thursday, the EUR/USD currency pair traded lower, which can be considered an exception to the general trend. Nearly all macroeconomic reports during the day were unfavorable for the euro, and the market showed some leniency toward the dollar. Over the day, the U.S. currency appreciated by about 50 pips, which does not affect the current trend on the hourly and 4-hour timeframes. We have a clearly defined uptrend line on the hourly chart, and the price remains above the Ichimoku indicator lines. In the 4-hour timeframe, the trend is clear and requires no explanation. Therefore, after a minor correction, upward movement may resume with renewed strength.
Eurozone business activity indices across the board were weak in the services and manufacturing sectors. All four key indicators fell below forecasts and dropped below the 50.0 "waterline." In contrast, the U.S. business activity indices were stronger than expected and moved further from the critical 50.0 level. As a result, six reports supported the dollar, leading to a modest increase in value. However, it's worth remembering that the U.S. has internal ISM business activity indices, which are far more significant to the market than the standard S&P metrics. It's those that truly matter.
In the 5-minute timeframe, the first signals of the day, which had been formed during the European session, turned out to be false. This coincided with the release of business activity indices from Germany and the Eurozone as the pair approached the 1.1321 level, triggering a spike in volatility and erratic price swings. The pair steadily declined for the rest of the day, but those early false signals spoiled the overall sentiment and discouraged traders from entering positions in the euro.
COT Report
The most recent Commitment of Traders (COT) report is dated May 13. As the chart above illustrates, the net position of non-commercial traders has long remained bullish. Bears briefly overtook but quickly lost control. Since Trump took office, the dollar has been falling sharply. While we can't guarantee that this decline will continue indefinitely, COT reports reflect the sentiment of major market players, though in current circumstances, that sentiment can shift quickly.
There are no fundamental reasons for the euro to strengthen, but the dollar faces a significant political burden. EUR/USD may continue to correct for several more weeks or months, but the broader 16-year downtrend won't reverse so quickly. Once Trump's trade wars end, the dollar may resume its upward trend.
The red and blue lines on the COT chart have crossed again, signaling a renewed bullish trend. During the last reporting week, the number of long positions from non-commercial traders increased by 15,400, while shorts rose by 6,300. As a result, the net position grew by 9,000 contracts.
EUR/USD 1-Hour Analysis
In the hourly chart, EUR/USD is attempting to resume its upward trend and has consolidated above the Ichimoku indicator lines. The outlook for the U.S. dollar still depends on developments in the global trade war. If trade agreements are signed and tariffs are reduced, the dollar may resume its recovery. However, a sustained upward movement in the dollar requires a break below both the Ichimoku lines and the trendline. While the dollar has potential for growth, its chances aren't high, as the market still tends to avoid the "Trump currency," buying it only as a last resort.
For May 23, we highlight the following levels for trading - 1.0823, 1.0886, 1.0949, 1.1006, 1.1092, 1.1147, 1.1185, 1.1234, 1.1274, 1.1362, 1.1426, 1.1534, as well as the Senkou Span B (1.1224) and Kijun-sen (1.1247) lines. Ichimoku indicator lines may shift throughout the day, which should be considered when determining trading signals. Don't forget to place Stop Loss at breakeven if the price moves 15 pips in the correct direction. This will protect you from potential losses if the signal is false.
No crucial events or reports are scheduled in the Eurozone or the U.S., so the dollar has no strong reason to continue rising. A mild correction to the Senkou Span B and Kijun-sen lines may occur for formality's sake, but we do not expect a significant upward move. Unless, of course, new headline-grabbing news emerges from the White House.
Illustration Explanations:
- Support and resistance price levels – thick red lines where movement may end. They are not trading signal sources.
- Kijun-sen and Senkou Span B lines—These are strong Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour one.
- Extremum levels – thin red lines where the price has previously rebounded. These act as trading signal sources.
- Yellow lines – trend lines, trend channels, and other technical patterns.
- COT Indicator 1 on the charts – the size of the net position for each category of traders.
