Trading Recommendations and Trade Review for EUR/USD on October 20. Inflation in the EU Delivered a Surprise

Redator · 3 horas atrás

EUR/USD 5-Minute Chart Analysis

On Friday, EUR/USD posted a relatively strong downward movement—something that would not be expected from a single macroeconomic report like euro area inflation data. In the previous analysis, we stated that the market was unlikely to react significantly to this release, as the second estimate of inflation rarely moves markets. However, this time the data surprised: the Consumer Price Index (CPI) for September came in at 2.4% year-over-year, instead of the 2.3% previously reported.

What does this mean? Inflation is accelerating, and the European Central Bank clearly won't lower interest rates any time soon. If inflation keeps climbing, the central bank may even consider raising rates once or twice next year. This theoretically improves the euro's outlook by strengthening the ECB's hawkish stance.

However, the euro still declined on Friday, despite the data. Traders appeared to ignore the report and instead focused on the shift in tone from Donald Trump. The U.S. dollar found support after Trump backed away from imposing 100% tariffs on Chinese imports "for now." Essentially, Trump admitted to using tariff threats as a negotiation tool to extract concessions from China. This move helped the dollar strengthen modestly.

On the 5-minute chart, EUR/USD only reached key levels late on Friday. No actual trading signals were generated throughout most of the session. A bounce during the U.S. session from the 1.1657–1.1666 area could have been used for opening long positions, but doing so at the end of the trading day would have been risky.

COT Report

The latest Commitment of Traders (COT) report is dated September 23. No further reports have been released due to the U.S. government shutdown.

The chart still shows that non-commercial traders have maintained a bullish net position for a long time. Bears briefly gained dominance in late 2024 but quickly lost it. Since Trump returned to office, the dollar has been consistently weakening. While the current trajectory doesn't guarantee further losses for the dollar, global developments continue to point in that direction.

There are still not many reasons to favor euro strength fundamentally, but there are several solid arguments for continued dollar weakness. The global downtrend for the dollar remains intact. Whether the dollar recovers may depend on whether Trump eventually ends his trade wars—but recent events suggest that the conflict will continue in one form or another.

The potential loss of Federal Reserve independence is yet another significant bearish factor for the greenback.

The positions of the red and blue lines on the COT indicator still suggest a bullish bias. During the last reporting week, non-commercial long positions declined by 800,000, while short positions rose by 2,600. The net position fell by 3,400 contracts. However, these figures are now outdated and largely irrelevant.

EUR/USD 1-Hour Chart Analysis

On the 1-hour timeframe, EUR/USD may have ended its bearish trend two weeks ago. The trendline was broken, the Kijun-sen line was broken, the 1.1604–1.1615 and 1.1657–1.1666 areas were also breached, and even the Senkou Span B line was taken out. All of this supports expectations for further upward movement. We believe it's high time for the euro to begin climbing again, although market participants remain hesitant—for now.

For October 20, the following levels are in play: 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. Also watch the Senkou Span B line (1.1661) and the Kijun-sen line (1.1635). Note that Ichimoku indicator lines may shift during the trading day, and should be updated when determining trading signals. Don't forget to set Stop Loss to breakeven once the price moves 15 pips in your favor—to protect against potential reversals.

On Monday, Germany will release the Ifo Business Climate Index (a secondary report), while the U.S. will publish the more significant Durable Goods Orders report. In the absence of higher-impact events, the U.S. release may move the market.