EUR/USD 5-Minute Analysis

The EUR/USD currency pair continued its decline on Friday. While this movement did not completely align with the macroeconomic backdrop, it also did not contradict it. Two important reports from Germany—unemployment and inflation—were expected, but both showed disappointing results. The unemployment rate remained unchanged, and inflation levels did not shift either. Only the retail sales report exceeded expectations slightly, but that was insufficient for the euro to break through the upper boundary of the sideways channel on the daily timeframe and continue its upward trend. Ultimately, the bulls' inability to overcome the 1.0524 level triggered another wave of decline, which was further reinforced by a global fundamental backdrop that strongly favors the U.S. dollar.

This week, market movements may vary, and a new rise for the euro is not ruled out. However, it remains unclear how the market will react on Monday to the clash between Trump and Zelensky at the White House, as this event occurred after the market closed. Additionally, several important events in both the Eurozone and the U.S. are scheduled throughout the week, which could weaken the dollar. At this time, though, the expectation is primarily for a return to the 1.0220 level.

On the 5-minute timeframe on Friday, only one ambiguous signal was generated. The price rebounded from the Senkou Span B line, which changed position throughout the day. Traders needed to monitor this line closely and respond accordingly. Although the signal was somewhat inaccurate, it still provided an opportunity for profit, as the nearest target of 1.0366 was reached.

COT Report

The latest Commitment of Traders (COT) report is dated February 25. The illustration above clearly shows that non-commercial traders have maintained a bullish net position for an extended period; however, bears have now taken the lead. Three months ago, professional traders significantly increased their short positions, causing the net position to turn negative for the first time in a while. This indicates that the euro is currently being sold more often than it is being bought, and bearish sentiment continues to dominate the market.

There are still no fundamental factors supporting a strengthening of the euro. The recent upward movement observed on the weekly timeframe is minimal and appears to be merely a technical correction. The long-term downward trend, which has persisted for 16 years, remains intact, even if the pair experiences correction for several more weeks or months.

At present, the red and blue lines have crossed and reversed their positions relative to each other, signaling a bearish trend in the market. During the last reporting week, long positions among the "non-commercial" group increased by 12,400, while short positions decreased by 13,600. Consequently, the net position rose by 26,000 contracts; however, this change has not yet influenced the overall market sentiment.

EUR/USD 1-Hour Analysis

On the hourly timeframe, the pair has finally begun the expected decline. We believe this downtrend will continue in the medium term, as the Federal Reserve is expected to cut rates only once or twice in 2025, while the European Central Bank is likely to cut rates much more aggressively. However, in the short term, we may see one or two more upward movements, as the correction on the daily timeframe could take a long time and be quite complex. There are still no substantial reasons for the euro to rise, and occasional gains are mainly technical, accounting for about 80% of the movement.

For March 3, the key trading levels are 1.0124, 1.0195, 1.0269, 1.0340-1.0366, 1.0461, 1.0524, 1.0585, 1.0658-1.0669, 1.0757, 1.0797, 1.0843, as well as the Senkou Span B (1.0423) and Kijun-sen (1.0448) lines. The Ichimoku indicator lines may shift throughout the day, so traders should consider this when determining trade signals. It's important to set a Stop Loss to break even if the price moves 15 pips in the right direction to protect against potential losses if the signal is false.

On Monday, business activity indices for the manufacturing sectors will be released in the Eurozone, Germany, and the U.S. The ISM index will be of particular importance. The Eurozone's February inflation report will also be published, which does not bode well for the euro...

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.