Analysis of EUR/USD 5M

The EUR/USD currency pair continued its downward movement on Friday after breaking through another ascending trendline. As mentioned, there is an ongoing flat trend on the daily timeframe, so the current decline is technical within the global sideways channel. On Friday, the Eurozone published its October inflation report, which triggered another decline in the European currency. From our perspective, this report is merely another excuse for selling the euro, which the market has actively taken advantage of recently. Formally, since inflation has decreased, the European Central Bank has taken one small step closer to easing monetary policy. The fact that the ECB meeting was held last week, that Christine Lagarde openly stated that the current parameters of monetary policy are completely satisfactory to the central bank, and that inflation is stable and around the target level doesn't matter.

From a technical standpoint, we have a new downward trend, and the euro currency can fall another 130-140 pips within the same sideways channel. Therefore, next week we may again observe a completely illogical (from a fundamental and macroeconomic perspective) decline.

On the 5-minute timeframe, several trading signals were generated around the 1.1534 level on Friday, but they formed closer to the evening when the downward movement was already effectively completed. There were no significant reports or events during the American trading session.

COT Report

The latest COT report is dated September 23. Since then, no COT reports have been published due to the US "shutdown". The illustration above clearly shows that the net position of non-commercial traders has been "bullish" for a long time, with bears struggling to gain the upper hand at the end of 2024 but quickly losing it again. Since Trump took office for a second time as US president, only the dollar has been falling. We cannot say with 100% certainty that the decline of the American currency will continue, but the current events in the world suggest this is likely.

We still do not see any fundamental factors that would strengthen the European currency, while there remain sufficient factors for the decline of the American one. The global downward trend is still present, but does it really matter where the price has moved over the past 17 years? As soon as Trump concludes his trade wars, the dollar may begin to rise, but recent events show that the conflict will continue in one form or another for a long time.

The positioning of the red and blue lines of the indicator continues to indicate a persistent "bullish" trend. Over the last reporting week, the number of long positions for the Non-commercial group decreased by 800, while the number of shorts 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.

Analysis of EUR/USD 1H

On the hourly timeframe, the EUR/USD pair could have completed a downward trend two weeks ago, but ultimately moved higher instead. Recently, the European currency has only been declining, and it remains difficult to find explanations for this that are not from the realm of science fiction. We believe that the primary reason for the inadequate and illogical movements is the flat trend on the daily timeframe. And this flat trend persists.

As of November 3, we highlight the following levels for trading: 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, as well as the Senkou Span B line (1.1637) and the Kijun-sen line (1.1595). The Ichimoku indicator lines may move throughout the day, which should be taken into account when determining trading signals. Don't forget to set your stop-loss orders to breakeven after the price has moved in the right direction by 15 pips. This will protect against potential losses if the signal turns out to be false.

On Monday, indices of business activity are scheduled for publication in the Eurozone, Germany, and the USA. Of this series of reports, only the ISM index for the US manufacturing sector attracts interest. This is an important report that may provoke a strong market reaction.

Trading Recommendations:

On Monday, traders may expect the decline to continue and trade from the 1.1534 level. As mentioned, given the flat trend on the daily timeframe, the euro's decline may continue on a technical basis for another week.

Explanations for the Illustrations:

• Support and resistance price levels are represented by thick red lines, near which movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B lines are Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. They are strong lines.
• Extremum levels are indicated by thin red lines, from which the price has previously bounced. They are sources of trading signals.
• Yellow lines represent trendlines, trend channels, and any other technical patterns.
• Indicator 1 on the COT charts shows the size of each category of traders' net position.