EUR/USD 5-Minute Analysis

The EUR/USD currency pair continued its downward trend on Wednesday, a movement that began on Monday. Although volatility remains low, this has not prevented the euro from declining. By Wednesday evening, the pair reached the ascending trendline, and worked it out for the fourth or fifth time. Each subsequent time, the likelihood of breaking through this line increases. A break below the trendline would signal the start of a new bearish wave.

It's important to note that the current movement of the euro is still considered a correction on the daily timeframe. This correction may not yet be complete, but it is clear that the euro is struggling to rise due to a lack of fundamental and macroeconomic support. Therefore, we wouldn't be surprised if the four-month downward trend resumes at current levels. However, on the hourly timeframe, a consolidation below the trendline is required before considering selling.

During Wednesday's U.S. trading session, two reports were published, but neither had a significant impact on the pair's movement. As anticipated, data on building permits and housing starts did not greatly influence the market. One report exceeded forecasts, while the other fell short; nonetheless, the dollar continued to strengthen regardless.

On the 5-minute timeframe, two solid trading signals emerged. Early in the European session, the price bounced off the 1.0461 level and then broke below the critical Kijun-sen line. A short position could have been manually closed by the evening, yielding a minimum profit of 40 pips, which is quite respectable given that the daily volatility was around 60 pips.

COT Report

The latest Commitments of Traders (COT) report, dated February 11, reveals that non-commercial traders have maintained a bullish net position for an extended period. However, bears have now taken control. Three months ago, there was a significant increase in short positions among professional traders, resulting in a negative net position for the first time in a long while. This shift indicates that the euro is now being sold more frequently than it is being bought.

Currently, there are no fundamental factors supporting the strength of the euro. The recent upward movement on the weekly timeframe is barely noticeable, suggesting it is merely a technical pullback. The long-standing 16-year downward trend remains intact, even if the pair continues to experience corrections for a few more weeks.

At present, the red and blue lines in the COT report have crossed, indicating a change in their relative positions and signaling a bearish trend in the market. During the last reporting week, long positions among non-commercial traders increased by 3,000, while short positions rose by 8,800, leading to a net position decrease of 5,800.

EUR/USD 1-Hour Analysis

On the hourly timeframe, the currency pair remains in a local uptrend; however, we expect a decline to resume in the medium term. This outlook is based on the expectation that while the Federal Reserve may cut interest rates only 1-2 times in 2025, the European Central Bank is anticipated to implement more significant cuts. In the short term, though, we may witness one or two additional upward movements, as the correction on the daily timeframe could take longer to materialize. Currently, there are no strong reasons for the euro to appreciate, and its occasional increases are primarily driven by technical factors—about 80% of the time.

For February 20, the following key trading levels have been identified: 1.0124, 1.0195, 1.0269, 1.0340-1.0366, 1.0461, 1.0524, 1.0585, 1.0658-1.0669, 1.0757, 1.0797, and 1.0843. Additionally, the Ichimoku indicator lines are significant, with Senkou Span B at 1.0327 and Kijun-sen at 1.0445. Traders should keep in mind that these Ichimoku lines may shift throughout the day, influencing trading signals. It is advisable for traders to set a Stop Loss order at breakeven if the price moves 15 pips in the anticipated direction. This strategy helps mitigate potential losses if the trading signal turns out to be inaccurate.

On Thursday, there are no major events or economic reports scheduled for release in the Eurozone. In the U.S., the jobless claims report will be published; however, this data is not particularly significant for traders. Therefore, we have a high probability of experiencing limited market movements today, with trading relying primarily on technical levels and lines.

Illustration Explanations:

• Support and Resistance Levels (thick red lines): Thick red lines indicate where movement may come to an end. Please note that these lines are not sources of trading signals.
• Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. These are strong lines.
• Extreme Levels (thin red lines): Thin red lines where the price has previously bounced. These serve as sources of trading signals.
• Yellow Lines: Trendlines, trend channels, or any other technical patterns.
• Indicator 1 on COT Charts: Represents the net position size for each category of traders.