EUR/USD Analysis 5M

The EUR/USD currency pair resumed its downward movement on Wednesday, influenced by two factors. First, the US Producer Price Index (PPI) rose by 0.7% in February, significantly above forecasts. Second, the Federal Reserve demonstrated a tightening of its monetary views. In our opinion, even yesterday, the market could have done without new dollar purchases, considering its growth over the past month and a half. However, there were formal reasons. If the PPI is rising, inflation will also increase, as producer prices are passed through to retail prices. If the Fed previously expected two rate cuts in 2026 and now only one, this tightening of monetary expectations also favors the dollar. However, amid rising concerns about accelerating inflation, this is the scenario most traders anticipated. Yet, as we see, the market did not preemptively respond to its own expectations this time; rather, it waited for another reason to buy the American currency.

Thus, once again, the break of the descending trendline led to nothing. All traders can clearly see that technical factors have simply not been working for the last month. The price is breaking the third or fourth trendline in a row, then calmly heads back south. In our view, the problem remains in the geopolitical backdrop, which simply undermines all other factors and types of analysis.

On the 5-minute time frame on Wednesday, three rather imprecise signals were formed. The price bounced off the 1.1542 level twice before eventually falling to the Kijun-sen line. Therefore, traders could open a short position, but neither signal was the most precise. The bounce from the critical line allowed for long positions, but the price could not reach the target level. Then another collapse began...

COT Report

The latest COT report is dated March 10. The illustration on the weekly time frame clearly shows that the net position of non-commercial traders remains "bullish," while since Trump took office as president of the United States for the second time, only the dollar has been falling. In recent weeks, the American currency has appreciated due to geopolitical reasons, but the long-term upward trend remains intact.

We still do not see any fundamental factors supporting the strengthening of the European currency. However, there are plenty of factors favoring a decline of the American dollar. The war in the Middle East made the dollar temporarily super-attractive, but when this factor expires is an open question. In the long term, the euro could fall to 1.06 (the trendline), but the upward trend will remain relevant.

The positioning of the red and blue lines of the indicator continues to indicate a persistent "bullish" trend. Over the last reporting week, the number of longs in the "Non-commercial" group decreased by 28,900, while the number of shorts decreased by 2,500. Accordingly, the net position decreased by 25,400 contracts over the week.

EUR/USD Analysis 1H

On the hourly time frame, the EUR/USD pair could have completed its downward trend this week, but the market ultimately chose to reflect the Fed's tighter stance on monetary policy. A new escalation in the Middle East, new shocks in the oil or gas markets, and the expansion of the conflict beyond the Middle East could also provoke a new wave of dollar purchases. Once again, breaking the trendline did not work. Currently, only geopolitics and factors favoring the dollar are at play.

For March 19, we highlight the following levels for trading: 1.1234, 1.1274, 1.1362, 1.1426, 1.1542, 1.1615–1.1625, 1.1657–1.1666, 1.1750–1.1760, 1.1830–1.1837, as well as the Senkou Span B line (1.1538) and the Kijun-sen line (1.1481). The Ichimoku indicator lines may shift throughout the day, which should be taken into account when determining trading signals. Don't forget to set a Stop Loss order to break even if the price moves in the correct direction by 15 pips. This will protect you from potential losses if the signal turns out to be false.

On Thursday, the ECB meeting in the Eurozone could prevent the euro from suffering another setback. If the ECB signals that a tightening of monetary policy is possible soon, this could improve the euro's position. However, it is far from certain that the market will want to sell the dollar and buy euros, even if there are grounds to do so.

Trading Recommendations:

On Thursday, traders may consider new short positions if the price consolidates below the Kijun-sen line with a target at 1.1426. Long positions can be considered if the price consolidates above the Senkou Span B line or bounces from the Kijun-sen line, targeting the 1.1615–1.1625 area.

Explanations for Illustrations:

• Price levels of support and resistance (resistance/support) – thick red lines, around which the movement may end. These are not sources of trading signals.
• Kijun-sen and Senkou Span B lines – lines from the Ichimoku indicator transferred to the hourly time frame from the 4-hour. These are strong lines.
• Extremum levels – thin red lines, from which the price has previously bounced. These are sources of trading signals.
• Yellow lines – trend lines, trend channels, and any other technical patterns.
• Indicator 1 on the COT charts – the size of the net position of each category of traders.