EUR/USD 5-Minute Analysis

On Wednesday, the EUR/USD currency pair continued its upward movement. This time, the volatility was noticeably low, yet the pair still appreciated. So, did it have reasons for this rise? The answer is both yes and no. Let's break it down. In the first half of the day, Germany and the Eurozone released their services PMI data, which were underwhelming and offered no surprises. European reports continue to rarely show positive results. Nevertheless, during the entire European session, the euro steadily climbed. Then, during the U.S. session, the ISM Services PMI was released. This index came in 1.5 points below forecasts, although it remained above the key level of 50. While this figure is considered negative, the dollar did not weaken, and the euro did not rise further.

Thus, we conclude that the euro appreciated when there were no clear reasons for it to do so, and when reasons emerged, it stopped rising. This suggests that the movements observed yesterday were somewhat illogical, which aligns with the corrective nature of the current upward trend that has been ongoing for several weeks. Remember, we are dealing with a correction on the daily timeframe, which could continue for some time.

On the 5-minute timeframe, one trading signal was generated on Wednesday. During the European session, the price smoothly broke through the Senkou Span B line without any issues. Traders could have opened long positions based on this signal, but there were almost no further movements by the end of the day. Nevertheless, it was possible to earn 10 to 15 pips.

COT Report

The latest COT report is dated January 28. The chart clearly shows that the net position of non-commercial traders remained bullish for an extended period; however, bears have now gained the upper hand. Two months ago, professional traders sharply increased the number of short positions, causing the net position to turn negative for the first time in a long time. This shift indicates that the euro is being sold more frequently than it is being bought.

Currently, there are no fundamental factors supporting the euro's strength. The recent upward movement of the euro on the weekly timeframe is barely noticeable and can be seen as just a simple pullback. While the pair may correct for a few more weeks, this does not change the 16-year downtrend.

At present, the red and blue lines have crossed and changed their relative positions, indicating a bearish trend in the market. Over the last reporting week, the number of long positions in the non-commercial group decreased by 14,000, while short positions fell by 9,900. As a result, the net position decreased by another 4,100 contracts.

EUR/USD 1-Hour Analysis

On the hourly timeframe, the currency pair has completed a local downtrend, having breached the descending trendline. We believe this decline will continue in the medium term, as the Federal Reserve may only cut rates once or twice in 2025, which represents a more hawkish stance than the market had anticipated. However, in the short term, we might observe one or two upward trends. The euro still lacks strong drivers for growth, but corrections are taking place.

On February 6, we highlight the following trading levels: 1.0124, 1.0195, 1.0269, 1.0340-1.0366, 1.0461, 1.0524, 1.0585, 1.0658-1.0669, 1.0757, 1.0797, and 1.0843, along with the Senkou Span B (1.0400) and Kijun-sen (1.0340) lines. Please note that the Ichimoku indicator lines may shift throughout the day, so keep this in mind when identifying trading signals. Remember to set your Stop Loss to breakeven if the price moves 15 pips in the favorable direction. This will help protect you from potential losses if the signal turns out to be false.

For Thursday, the Eurozone is set to publish its retail sales report for December. We believe this report will have little to no impact on the market. On Wednesday, the pair exhibited completely illogical movements. In the U.S., there are no significant events scheduled for today, only a secondary report on initial jobless claims. The Bank of England meeting might also affect the euro; however, we are focused on logical movements. Today, the market could experience another "storm."

Illustration Explanations:

• Support and Resistance Levels (thick red lines): Thick red lines indicate where movement may come to an end. Please note that these lines are not sources of trading signals.
• Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the 4-hour timeframe to the hourly timeframe. These are strong lines.
• Extreme Levels (thin red lines): Thin red lines where the price has previously bounced. These serve as sources of trading signals.
• Yellow Lines: Trendlines, trend channels, or any other technical patterns.
• Indicator 1 on COT Charts: Represents the net position size for each category of traders.