EUR/USD 5M Analysis

On Wednesday, the EUR/USD pair continued its downward movement, though the logic behind this direction can again be questioned. As a reminder, the Federal Reserve lowered the key interest rate by 0.25% the previous day, but Jerome Powell expressed doubts about the central bank's readiness to continue easing in December. He justified his doubts by citing the lack of macroeconomic data, which is entirely logical. Thus, Powell did not rule out a December cut; he said it wouldn't be wise to make a decision on December 10 without data. However, the market interpreted these statements as almost a refusal of a new rate cut, which spurred the dollar's growth.

On Thursday, the Eurozone published a range of macroeconomic data, most of which did not pose new problems for the euro. The Eurozone's third-quarter GDP exceeded expectations; Germany's figures matched forecasts; inflation in Germany rose more slowly than anticipated; and the unemployment rate remained unchanged. From my perspective, none of these reports forecasted a decline in the European currency. Yet, we observed exactly that—a decline in the euro.

From a technical standpoint, the not-yet-established upward trend was canceled as the price breached the ascending trend line. On the 5-minute timeframe, the pair settled below the 1.1604-1.1666 area, allowing traders to open short positions. By the evening, these could be manually closed for a good profit.

COT Report

The latest COT report is dated September 23. Since then, no further COT reports have been published due to the US "shutdown". The illustration above clearly shows that the net position of non-commercial traders had long been "bullish," with bears struggling to gain the upper hand at the end of 2024, only to lose it quickly. Since Trump returned to the presidency, only the dollar has been falling. We cannot state with 100% certainty that the US currency's decline will continue, but current global events suggest this is a possibility.

We still see no fundamental factors that would strengthen the euro, while there are sufficient factors for the US dollar's decline. The global downward trend persists. However, what significance does the price movement over the last 17 years hold now? Once Trump concludes his trade wars, the dollar may begin to rise, but recent events have shown that the conflict will continue in one form or another. The potential loss of the Fed's independence is a significant factor putting pressure on the US currency.

The positioning of the red and blue lines of the indicator continues to indicate the maintenance of a "bullish" trend. Over the last reporting week, the number of long positions in the "Non-commercial" group decreased by 800, while short positions increased by 2,600. Consequently, the net position for the week decreased by 3,400 contracts. However, this data is already outdated and holds no significance.

EUR/USD 1H Analysis

On the hourly timeframe, the EUR/USD pair could have completed its downward trend as far back as the week before last, but instead finished the upward trend. Recently, the European currency has been declining, which remains difficult to explain without resorting to science fiction. We believe the main reason for the irrational and inadequate movements is the flat status on the daily timeframe, which remains in place.

For October 31, we highlight the following trading levels: 1.1234, 1.1274, 1.1362, 1.1426, 1.1534, 1.1604-1.1615, 1.1657-1.1666, 1.1750-1.1760, 1.1846-1.1857, 1.1922, 1.1971-1.1988, and the Ichimoku lines Senkou Span B (1.1637) and Kijun-sen (1.1609). The Ichimoku indicator lines may shift during the day, which should be considered when determining trading signals. Don't forget to set Stop Loss orders to breakeven if the price moves favorably by 15 pips to protect against potential losses if the signal turns out to be false.

On Friday, inflation and German retail sales reports are scheduled for release in the Eurozone. The inflation report may draw the market's interest, but we remind you that the European Central Bank's decisions currently do not depend on inflation, as the index is very close to the target level. In the US, the shutdown continues, so no reports will be published.

Trading Recommendations:

On Friday, traders can expect the decline to continue and trade from the areas of 1.1604-1.1615 or the 1.1534 level. As mentioned earlier, given the flatness on the daily timeframe, the euro's decline may continue on technical grounds.

Explanations for the Illustrations:

• Support and Resistance Levels: Thick red lines where movement may end; these do not provide trading signals.
• Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour. They are strong lines.
• Extreme Levels: Thin red lines where the price previously bounced; these are sources of trading signals.
• Yellow Lines: Trend lines, trend channels, and other technical patterns.
• Indicator 1 on COT Charts: The size of the net position for each category of traders.