EUR/USD 5-Minute Analysis
The EUR/USD currency pair showed a somewhat significant downward movement on Tuesday. However, this move did not impact the overall trend, market sentiment, or the broader context. The strengthening of the U.S. dollar began on Monday when it was announced that Trump had postponed his decision to raise tariffs on the European Union to 50%, initially scheduled for June 1. On Tuesday, the dollar received additional support from the U.S. durable goods orders report, which was less weak than expected. One could say that the dollar finally reacted logically to macroeconomic and fundamental factors—but it's far too early to celebrate.
Of course, the dollar won't fall forever. Sooner or later, the market will remember that trade wars aren't the only factors influencing pricing. It will recall the European Central Bank's aggressive monetary easing and the absence of any easing from the Federal Reserve. But how can we, as traders know when the market has shifted its attention from the trade war to other factors—many of which actually support the dollar? The answer is simple: through technical analysis. At the moment, the trendline still indicates a continuation of the upward trend. Therefore, there is no strong justification to expect a robust dollar recovery just yet.
In the 5-minute timeframe, Tuesday's trading signals were very weak. Things might have turned out differently were it not for the U.S. durable goods report. Initially, the pair broke above the 1.1362 level, then the downward momentum faded, and the price consolidated above 1.1362. It made sense to expect renewed dollar weakness at that point, but the positive report reversed everything, sending the price downward again.
COT Report
The latest COT report is dated May 20. The chart above clearly shows that the net position of non-commercial traders remained bullish for a long time. Bears barely gained dominance at the end of 2024 but quickly lost it. Since Trump took office, the dollar's value has been declining significantly. We cannot confidently say with 100% certainty that the dollar's decline will continue, but current global developments suggest that outcome.
No fundamental factors support the euro's strength; however, one significant factor contributes to the dollar's weakness. The long-term downtrend persists, though what does the trend even mean right now? The dollar could rise again once Trump ends his trade wars, but will he?
The red and blue lines have crossed again, indicating a renewed bullish sentiment in the market. During the latest reporting week, the number of long positions among "Non-commercial" traders decreased by 3,500, while short positions increased by 6,800. As a result, the net position fell by 10,300. However, the COT reports are released with a one-week delay. The market is once again actively buying now.
EUR/USD 1-Hour Analysis
In the hourly timeframe, EUR/USD maintains a local uptrend, part of a four-month broader trend. The dollar's outlook still hinges on developments in the global trade war. If trade agreements are signed and tariffs are reduced, the U.S. dollar may begin to recover. However, for now, there are no peace agreements in sight, and Trump continues to make erratic decisions and statements that shock market participants. The market remains cautious and lacks trust in Trump. The price must consolidate below the trendline for the uptrend to be considered broken.
For May 28, the following levels are identified for trading: 1.0823, 1.0886, 1.0949, 1.1006, 1.1092, 1.1147, 1.1185, 1.1234, 1.1274, 1.1362, 1.1426, 1.1534, 1.1607, along with Senkou Span B (1.1214) and Kijun-sen (1.1338). The Ichimoku indicator lines may shift throughout the day, so this should be considered when identifying trading signals. Don't forget to place a Stop Loss at breakeven if the price moves 15 pips in the correct direction. This helps protect against potential losses if the signal turns out to be false.
No significant events or reports are scheduled in the Eurozone, except for Germany's unemployment report—which can only be considered significant with some stretch. In the U.S., the Fed minutes will be released in the evening. Both events are of secondary importance, so the dollar has no strong reason to continue its corrective rise today.
Illustration Explanations:
- Support and resistance price levels – thick red lines where movement may end. They are not trading signal sources.
- Kijun-sen and Senkou Span B lines—These are strong Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour one.
- Extremum levels – thin red lines where the price has previously rebounded. These act as trading signal sources.
- Yellow lines – trend lines, trend channels, and other technical patterns.
- COT Indicator 1 on the charts – the size of the net position for each category of traders.
