EUR/USD 5-Minute Analysis
The EUR/USD currency pair resumed its upward movement on Wednesday, and it is now safe to say that the uptrend is present not only in the hourly timeframe but also in the higher ones. Specifically, the 4-hour and daily timeframes indicate a resurgence of the old "Donald Trump" trend. On Monday, we mentioned that the market used formal reasons to resume selling the US dollar. On Tuesday, there were no reasons at all to sell the dollar. The same was true on Wednesday.
Nevertheless, the US dollar has lost around 170 pips this week alone. There is no news, no solid reasons. Even if the market initially welcomed the de-escalation of the trade war, that optimism didn't last long. And the very fact of "Trump-style de-escalation, "which essentially means lowering tariffs in exchange for negotiations, no longer excites traders.
The problem lies in the market participants' realization that the actions of Trump and his team are unlikely to lead to the "economic boom" the US president keeps promising. A recession, a decline in the labor market, and a widening budget deficit are far more probable. Internationally, Trump has clashed with half the world. If he's greeted with a smile, it's only because no one wants to antagonize the United States openly. Domestically, Trump is pushing through several legislative initiatives that have alarmed many experts. As a result, the dollar continues to fall, almost daily.
Yesterday, three buy signals were generated on the 5-minute timeframe around the 1.1321 level. The price initially broke through this level and then bounced off it several times. In each case, traders could have opened long positions. Since the nearest target was quite distant, trades could be closed manually once a satisfactory profit was reached.
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 timeframe, the EUR/USD pair is attempting to resume its upward trend and has consolidated above the Ichimoku indicator lines. The outlook for the US dollar continues to depend on developments in the global trade war. The dollar could recover if trade agreements are signed and tariffs are lowered. However, the price must consolidate below the Ichimoku lines and the trendline for growth expectations to materialize. The dollar still has chances to rise but is limited, as the market prefers to avoid dealing with "Trump's currency."
For May 22, we identify the following key trading levels: 1.0823, 1.0886, 1.0949, 1.1006, 1.1092, 1.1147, 1.1185, 1.1234, 1.1274, 1.1321, 1.1426, 1.1534, as well as the Senkou Span B line (1.1224) and the Kijun-sen line (1.1247). The Ichimoku lines may shift throughout the day, so it is essential to consider their dynamic nature when identifying signals. Don't forget to place a Stop Loss at breakeven once the price has moved 15 pips in your favor to guard against potential losses if a signal turns out to be false.
On Thursday, business activity indices in the services and manufacturing sectors, along with a few less significant reports, are scheduled for release in the EU, Germany, and the US. These PMIs might trigger a mild market reaction, but they are unlikely to change the overall sentiment, which is firmly bullish.
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.
