Trading Recommendations and Trade Analysis for EUR/USD on November 5. Euro Shows No Signs of Stopping

[Ben Graham]

Analysis of EUR/USD 5M.

The EUR/USD currency pair continued to trade lower on Tuesday. Volatility was somewhat higher this time, at an average level, but there was no logic behind the movements. The euro has been falling for more than a month, almost without reason. Of course, there have been occasional less favorable macroeconomic data from the Eurozone, and sometimes there is good news from the U.S., but overall, it's the opposite trend. Nevertheless, the dollar has been rising on almost all fronts for over a month.

On Tuesday, no significant reports were published throughout the day. The only noteworthy event was a speech by Christine Lagarde, in which monetary policy and economic issues were not addressed at all. Thus, it could not have been the European Central Bank president's speech that triggered a new decline in the European currency. However, the British pound also fell throughout the day, with no apparent reason. Therefore, it can be said that the dollar continued its rise, for which there were even fewer grounds.

On the 5-minute timeframe, despite the pair's movement not being so great, a rather good trading signal was generated yesterday. During the European trading session, the price bounced from the 1.1534 level, then moved in the desired direction by about 35-40 pips. Thus, opening a short position based on this signal could have yielded a decent profit (given current realities).

COT Report

The latest COT report is dated September 23. Since then, no further COT reports have been published due to the U.S. "shutdown". The illustration above clearly shows that the net position of non-commercial traders had long been "bullish," and bears barely transitioned into a zone of their own superiority by the end of 2024, but quickly lost it. Since Trump began his second term as U.S. president, the dollar has only been falling. We cannot say with 100% certainty that the decline of the American currency will continue, but current developments around the world suggest this is likely.

We still do not see any fundamental factors that would strengthen the European currency, but there are enough factors for the American dollar to decline. The global downward trend is still maintained, but what relevance does it have to where the price has moved over the last 17 years? Once Trump concludes his trade wars, the dollar may begin to rise, but recent events indicate that the conflict will continue in some form for a very long time.

The positioning of the red and blue lines of the indicator continues to indicate the preservation of a "bullish" trend. Over the last reported week, the number of longs in the "Non-commercial" group decreased by 800, while the number of shorts rose by 2,600. Consequently, the net position decreased by 3,400 contracts over the week. However, this data is already outdated and holds no significance.

Analysis of EUR/USD 1H

On the hourly timeframe, the EUR/USD pair could have completed its downward trend two weeks ago, but instead completed an upward trend. Recently, the euro has been falling, and it is still extremely difficult to find explanations beyond the realm of science fiction. We believe that the main reason for the inadequate and illogical movements is the flat on the daily timeframe. And this flat persists.

For November 5, we identified the following levels for trading: 1.1234, 1.1274, 1.1362, 1.1426, 1.1534, 1.1604-1.1615, 1.1657-1.1666, 1.1750-1.1760, 1.1846-1.1857, 1.1922, 1.1971-1.1988, as well as the Senkou Span B line (1.1653) and Kijun-sen line (1.1569). The Ichimoku indicator lines may move during the day, which should be considered when determining trading signals. Do not forget to set a stop-loss order at break-even if the price moves in the right direction by 15 pips. This will protect against potential losses if the signal turns out to be false.

On Wednesday, the publication of business activity indices in the service sectors of Germany and the Eurozone is scheduled for October in its second assessment. However, this data is absolutely secondary. Much more significant information will come from the U.S. – the only possible current report on the state of the labor market, the ADP report, and the ISM business activity index for the services sector, published only in one assessment.

Trading Recommendations:

On Wednesday, traders may expect continued declines and could have opened a short position at 1.1534. Regarding new trading signals, they can only be formed near the levels of 1.1534 and 1.1426. The price is currently positioned precisely between these points.

Explanations for Illustrations:

• Support and resistance price levels are shown as thick red lines, near which the movement may end. They are not sources of trading signals.
• Kijun-sen and Senkou Span B lines are lines from the Ichimoku indicator transferred to the hourly timeframe from the 4-hour timeframe. They are strong lines.
• Extreme levels are thin red lines from which the price previously bounced. They are sources of trading signals.
• Yellow lines are trend lines, trend channels, and any other technical patterns.
• Indicator 1 on COT charts represents the size of each category of traders' net position.

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