EUR/USD 5-Minute Analysis

For most of Tuesday, the EUR/USD currency pair continued to trade with minimal volatility, moving sideways. The Eurozone industrial production report showed a relatively strong reading for May, but the European currency failed to benefit from it. At the start of the U.S. session, the June inflation report was released, which triggered "a song and dance." Even though the core figure fully matched forecasts, the pair first rose by 25 points in five minutes, then fell by 25 points in another five minutes, hovered for a bit, and then headed downward. These abrupt moves and convulsions only confused traders. It became clear that a large part of the market didn't understand how to interpret the inflation report. The Consumer Price Index increased. Jerome Powell has been warning about this for at least three months. Inflation rose in line with forecasts—so now what? Will the Federal Reserve cut rates in response to rising inflation? Definitely not.

As a result, the EUR/USD pair dropped another 70 points, continuing to trade strictly within the descending channel. Thus, there are currently no technical reasons to expect the bearish trend to end. Moreover, why rush to buy the pair if the price is moving in a technically perfect fashion? We still do not believe in a strong and prolonged rise in the dollar, and the fundamental background continues to suggest its eventual decline. Therefore, we must wait for the correct completion of the downtrend.

On the 5-minute chart, all trading signals formed during the inflation report. Since a spike in emotions was expected at that time, trading on that volatility wasn't advisable. We believe that all signals around the 1.1666 level should have been ignored.

COT Report

The latest COT report is dated July 8. As shown clearly in the illustration above, the net position of non-commercial traders had long remained "bullish." Bears only briefly gained the upper hand at the end of 2024 but quickly lost it. Since Trump took office as U.S. president, only the dollar has been falling. We cannot say with 100% certainty that the U.S. currency will continue to decline, but the current developments in the world suggest just that.

We still see no fundamental drivers for the euro's strengthening, but there remains one strong factor contributing to the dollar's decline. The global downtrend persists, but does it matter where the price moved over the last 16 years? As soon as Trump ends his trade wars, the dollar might begin to rise again—but will Trump end them? And when?

Currently, the red and blue lines have crossed again, so the trend in the market remains bullish. During the last reporting week, the number of long positions in the "Non-commercial" group increased by 16,100, while short positions increased by 3,100. Thus, the net position grew by 13,000 contracts over the week.

EUR/USD 1-Hour Analysis

On the hourly time frame, the EUR/USD pair maintains a downtrend supported by the descending channel. Therefore, the dollar may continue its convulsive strengthening for some time, but its fate seems sealed. Donald Trump continues to announce tariffs, starting August 1, and no trade deals are being signed. The dollar shows only a corrective rise. Accordingly, we believe the fundamental background still does not support the dollar. A breakout above the channel—and preferably above the Senkou Span B line—would signal a resumption of the uptrend that began earlier this year.

Trading levels for July 16: 1.1092, 1.1147, 1.1185, 1.1234, 1.1274, 1.1362, 1.1426, 1.1534, 1.1615, 1.1666, 1.1750, 1.1846–1.1857, plus the Ichimoku indicator lines: Senkou Span B (1.1755) and Kijun-sen (1.1675). The Ichimoku lines may fluctuate throughout the day and should be considered when identifying trading signals. Don't forget to move the Stop Loss to breakeven once the price moves 15 points in the correct direction—this protects against potential losses if the signal turns out to be false.

On Wednesday, the U.S. will publish several reports, none of which are significant—perhaps only industrial production stands out. The Eurozone has no events on the calendar. The pair continues to fall, and we do not believe that opening short positions is unjustified. However, keep in mind that the pace of the downtrend is extremely slow, as evidenced by the volatility in recent weeks. Yesterday's sharp drop happened only due to an important report. Today's movements may be much more modest.

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.