Quotes of the EUR/USD pair resumed the upward movement and overcame a new downward trend on the hourly timeframe over the past day, built at the highs of March 27 and May 1. In addition, the quotes of the pair ideally worked out the April 19 high at 1.0990, which is also the upper boundary of the side channel of 1.0750-1.0990, in which the pair has been trading in recent weeks. Thus, from current positions, a downward movement can begin with targets near the lower boundary of the channel, near the 1.0750 level. However, the key condition for executing this option is to not overcome the area of 1.0990-1.1008. If traders succeed in pushing this area, then the pair will be able to move to form a new upward trend with targets near the March 27 high at 1.1147.
We see a confident upward trend that continues on the 15-minute timeframe, judging by the two channels of linear regression. The lowest linear regression channel made an attempt to turn down yesterday, but the bulls today began to attack with renewed vigor and held the initiative in their hands. Turning the lower channel down will indicate the end of the upward trend in the short term, we also continue to monitor the pair’s behavior near the area of 1.0990-1.1008.
The latest COT report dated May 12 showed a new decrease in the number of buy and sell transactions among large traders, by 4,781 and by 3,554. Thus, the general mood of large traders remains bullish (the total number of purchase transactions is higher, 549,000-521,000), in addition to this, traders still managed to stay above the trend line on the 4-hour timeframe. Also, purchase positions increased among entities engaged in professional activities in the foreign exchange market (+4569 purchase transactions). Thus, the euro can continue to grow for some time, which we see this week.
As for the fundamental background, it is almost neutral for the pair. There is still a lot of news coming from both the European Union and the United States. Many of them are of great importance for the future of both countries, for their economies. However, traders continue to ignore current macroeconomic reports; therefore, the mood of traders and their preferences are in no way connected with the macroeconomic background. And the fundamental background is now so ambiguous that it is difficult to interpret in anyone else’s favor. On Thursday, May 21, we recommend that you pay attention to the next report on applications for unemployment benefits in the United States. According to expert forecasts, this indicator may again grow by several million, which will indicate a continued trend of rising unemployment overseas and, accordingly, may create additional pressure on the dollar, which, incidentally, will contradict the current technical picture.
Based on the foregoing, we have two trading ideas for May 21:
1) It is possible for quotes to grow if the resistance range of 1.0990-1.1008 is overcome, which consists of two corresponding levels. This will mean that the pair has left the side channel and is ready to form an upward trend with the first goal, the March 27 high at 1.1147. Potential to take profit in this case will be about 140 points.
2) The second option – bearish – is more likely. It is advised to sell euro from the resistance area of 1.0990-1.1008, not forgetting about the Stop Loss in case the bulls still continue to push the pair up. If a rebound occurs, the pair will begin to move downward, which we advise traders to practice, with targets at the 1.0952 level, the Kijun-sen line (1.0889), the Senkou Span B line (1.0846) and the upward trend line (1 , 0810). Potential to take profit in executing this scenario will be from 35 to 180 points.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.