EUR/USD 1H
The EUR/USD pair again worked the upper border of the side channel of 1.0750-1.1000 on the hourly timeframe during the third trading day of the week, from which it has not left in recent weeks. And at the same time, traders failed to overcome not only the 1,0990-1,1008 area, which is considered to be the area of the upper boundary of the channel, but also the Kijun-sen line, which did not allow the pair to go down at the next entry to the downward movement. Now the downward prospects of the pair are not bright. Despite the fact that buyers returned to the resistance level of 1,1006 and to the previous day's high, we still believe that the bulls can retreat at any time, and the pair could fall down. It did not confidently overcome the area of 1,0990-1,1008. However, now an upward trend line is also built on the hourly chart, which provides support for traders to rise.
EUR/USD 15M
We see how buyers completely dominate the market on the 15-minute timeframe in the last trading day. Both channels of linear regression are directed upward, clearly signaling the upward trend of the pair. There are still no signs of a reversal of any channel. However, everything, as before, depends on the area of the psychological level of 1.1000, from which the pair can rebound again.
COT Report
The latest COT report showed that large traders who trade for foreign exchange earnings, and not for hedging and current activities, continued to reduce euro purchases and increase sales in the reporting week. The growth of the latter was small, only 1257 contracts, but in aggregate with -3425 contracts for sale, we have a serious deterioration in the mood of traders regarding the euro. The total number of purchase contracts also decreased by 294 units, and the number of short-deals increased by 970 units. Thus, we see that the mood of traders remains bearish and only intensifies. However, trading this week shows that the US dollar was not able to extract dividends from this, and trading continues to be held in favor of the euro. True, at any moment the pair may crash on the basis of technical reasons.
The fundamental background for the pair at this time remains neutral. Neither the euro nor the dollar now enjoy a clear advantage in the foreign exchange market. Market participants ignored Christine Lagarde's speech from yesterday, although the head of the European Central Bank said potentially important things, for example, updated forecasts for the economic decline in 2020. In addition to Lagarde, ECB Vice President Luis de Guindos also spoke on this day, who said that some countries may not be able to cope with the debt burden created by the ECB and EU recovery programs as a result of the coronavirus epidemic, and may even leave the eurozone. "The increase in public debt adds even more to the already high levels of debt in some countries," said the ECB vice president. He also noted that Spain and Italy are at greatest risk, and the total debt of the eurozone will grow to 103% of GDP following the crisis. Thus, such messages could trigger a sell-off of the euro, but no. On Thursday, the most important reports are planned in the United States, which will publish data on orders for durable goods and applications for unemployment benefits.
Based on the foregoing, we have two trading ideas for May 28:
1) It is possible for the pair to grow further if the buyers confidently overcome the levels 1,0990 and 1,1006. Thus, for new purchases of the euro, we recommend that you wait for this condition to be met. Then the buy-positions will become relevant with the objectives of the resistance level of 1.1111 and the March 27 high at 1.1147. Potential to take profit in this case will be from 80 to 110 points.
2) The second option - bearish - is more likely. You are advised to expect a rebound from the area of 1,0990 - 1,1008 again. However, as the bull positions improved over the previous day, we also recommend waiting for the Kijun-sen (1.0951) critical line to be overcome and a new short-term upward trend line, and only after that the Senkou Span B line (1.0891 ) and the long-term upward trend. Potential to take profit is 20 and 90 points.
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