EUR/USD 5-Minute Analysis

On Wednesday, the EUR/USD currency pair continued to trade downward, but in the evening it suddenly surged upward. Once again, there were no clear reasons or grounds for the pair's decline. The European Union didn't publish any important or even noteworthy reports, while in the U.S., the Producer Price Index (PPI) and industrial production figures were released. The PPI for June came in at 0%, but the previous day the Consumer Price Index (CPI) showed an increase of 0.3%. In our view, the core inflation data is slightly more important than the producer price index. Industrial production rose by 0.3%, beating weaker forecasts. Therefore, for the second day in a row, the market had formal reasons to buy the U.S. dollar.

In our opinion, the overall fundamental backdrop remains such that dollar purchases should not be on the table. At the same time, we've said many times before that the market cannot sell the dollar every day, continuously. Thus, we maintain our view that the EUR/USD pair is undergoing a purely technical correction. Considering that the dollar had been in a downward freefall for five consecutive months, a 2.5-week correction is not very long.

Two trading signals were formed on Wednesday. During the entire European trading session, the market only pretended to be active. Several bounces from the 1.1615 level didn't even generate a 20-point movement. However, once the American session opened, prices started falling briskly. The price consolidated below 1.1615, then confirmed the breakout by bouncing off it from below. Therefore, traders could open short positions. Then, the inexplicable happened — the pair surged 150 points in just half an hour.

COT Report

The latest COT report is dated July 8. As shown clearly in the illustration above, the net position of non-commercial traders had long remained "bullish." Bears only briefly gained the upper hand at the end of 2024 but quickly lost it. Since Trump took office as U.S. president, only the dollar has been falling. We cannot say with 100% certainty that the U.S. currency will continue to decline, but the current developments in the world suggest just that.

We still see no fundamental drivers for the euro's strengthening, but there remains one strong factor contributing to the dollar's decline. The global downtrend persists, but does it matter where the price moved over the last 16 years? As soon as Trump ends his trade wars, the dollar might begin to rise again—but will Trump end them? And when?

Currently, the red and blue lines have crossed again, so the trend in the market remains bullish. During the last reporting week, the number of long positions in the "Non-commercial" group increased by 16,100, while short positions increased by 3,100. Thus, the net position grew by 13,000 contracts over the week.

EUR/USD 1-Hour Analysis

On the hourly timeframe, the EUR/USD pair maintains a downward trend supported by a descending channel. Therefore, the dollar could continue to strengthen for some time—this correction is indeed dragging on. However, Donald Trump's policies remain unchanged. Every other day, we hear about new sanctions, tariffs, or threats against half the countries in the world. A breakout above the channel—and preferably above the Senkou Span B line—would signal a resumption of the upward trend that began at the start of the year.

For July 17, we highlight the following levels for trading: 1.1092, 1.1147, 1.1185, 1.1234, 1.1274, 1.1362, 1.1426, 1.1534, 1.1615, 1.1666, 1.1750, 1.1846–1.1857, as well as the Senkou Span B line (1.1748) and the Kijun-sen line (1.1649). The Ichimoku indicator lines may shift during the day, so this should be taken into account when identifying trading signals. Don't forget to set the Stop Loss to breakeven if the price moves 15 pips in the desired direction. This protects against potential losses if the signal turns out to be false.

On Thursday, the Eurozone will release an inflation report, and the US will publish retail sales data. Both reports are of secondary importance. The inflation data will be in its second estimate, and the market is already pricing in a figure of 2.3%. Retail sales are more interesting, comparable to industrial production. The market could once again use any formal excuse to sell the EUR/USD pair.

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.