Fundamental analysis

Outlook and trading signals for EUR/USD on November 1. COT report. Analysis of market situation. Euro continues to fall ahead

Analysis of EUR/USD, 5-minute chart

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The euro/dollar pair continued to move down on Monday, as we predicted at the end of last week and over the weekend. We believe that the market has begun to work out the results of the Federal Reserve meeting in advance, which, in fact, are already known – the rate will be raised by 0.75% for the fourth consecutive time. Thus, the strengthening of the dollar is indeed logical. Take note that both major pairs fell simultaneously on Monday, so the euro is unlikely to decline due to macroeconomic statistics from the EU. We found out that GDP in the third quarter grew by only 0.2%, while inflation accelerated to 10.7%. As we said earlier, rising inflation is a bullish factor for the currency, as it means that the central bank can tighten its monetary policy even more. However, in the case of the European Central Bank, such a logical chain is not entirely correct, since now there are big doubts that the ECB will be able to raise the rate “to the bitter end.” Moreover, the results of the Federal Reserve meeting will be summed up tomorrow, which is clearly more important than European GDP or inflation.

In regards to Monday’s trading signals, the situation was almost perfect. Only two sell signals were formed during the European trading session and afterwards the price fell. The first signal can be considered false, since the price managed to go down only 18 points, which, however, was enough to set Stop Loss to breakeven. The second short position brought at least 50 points of profit, and it had to be closed manually in the late afternoon.

COT report

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In 2022, the Commitment of Traders (COT) report for the euro is becoming more and more interesting. In the first part of the year, the reports were pointing to the bullish sentiment among professional traders. However, the euro was confidently losing value. Then, for several months, reports were reflecting bearish sentiment and the euro was also falling. Now, the net position of non-commercial traders is bullish again. The euro managed to rise above its 20-year low, adding 500 pips. This could be explained by the high demand for the US dollar amid the difficult geopolitical situation in the world. Even if demand for the euro is rising, high demand for the greenback prevents the euro from growing. In the given period, the number of short orders initiated by non-commercial traders increased by 24,000, whereas the number of long orders declined by 2,700. As a result, the net position increased by 26,700 contracts. However, this could hardly affect the situation since the euro is still at the bottom. At the moment, professional traders still prefer the greenback to the euro. The number of buy orders exceeds the number of sell orders by 75,000. However, the euro cannot benefit from the situation. Thus, the net position of non-commercial traders may go on rising without changing the market situation. Among all categories of traders, the number of long positions exceeds the number of short positions by 19,000 (609,000 against 590,000).

We recommend to familiarize yourself with:

Overview of the EUR/USD pair. November 1. The EU economy is in a tailspin.

Overview of the GBP/USD pair. November 1. Elections in the UK will soon take on the character of an annual national tradition.

Forecast and trading signals for GBP/USD on November 1. Detailed analysis of the movement of the pair and trading transactions.

Analysis of EUR/USD, 1-hour chart

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The pair is moving upwards on the one-hour chart, however, a lot may change this week. So far, the price is above the Senkou Span B line and above the ascending trend line, and on the 24-hour timeframe, it has not managed to overcome the Ichimoku cloud. Therefore, the euro can fall by another 100 points and at the same time maintain an upward trend, but at the same time, a drop below the trend line will break the upward trend. On Tuesday, the pair may trade at the following levels: 0.9635, 0.9747, 0.9844, 0.9945, 1.0019, 1.0072, 1.0124, 1.0195, 1.0269, as well as the Senkou Span B (0.9900) and Kijun-sen (0.9982). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don’t forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. No important events are planned in the European Union, on the other hand, a rather important index of business activity in the manufacturing sector ISM and a less important S&P index for the same sector will be released in America. A reaction to ISM may follow, especially if its value is very different from the forecast.

What we see on the trading charts:

Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals.

The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines.

Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals.

Yellow lines are trend lines, trend channels, and any other technical patterns.

Indicator 1 on the COT charts reflects the net position size of each category of traders.

Indicator 2 on the COT charts reflects the net position size for the non-commercial group.

The material has been provided by InstaForex Company – www.instaforex.com


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