EURUSD Slide Stalls as COT Report Shows Rise in Net Euro Longs


The Commitment of Traders (COT) Report for the week which ended on March 31 indicates that speculators have increased their gross long positions on the Euro for the 3rd straight session during the last week. This trend takes the net Euro longs to near 2-year highs. Furthermore, the Robert Koch Institute (RKI), which is Germany’s equivalent of the US Centre for Disease Control, has reported a drop in the number of new coronavirus cases in the country on Monday. Coronavirus cases climbed by 3,677 on Monday, compared with the 5.936 new coronavirus cases recorded on Sunday. This is the 4th day in a row that the number of confirmed coronavirus cases has fallen. The combined effect of the COT report and the drop in new coronavirus cases may have provided some positive sentiment for Euro traders on the day. 

The markets have as good as priced-in the chances of a recession for Germany after new vehicle sales slumped to levels not seen since 2009. 

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Technical Outlook for EURUSD

The EURUSD is trading at 1.08058, marginally lower than it started the day. The EURUSD posted intraday lows at 1.07683. However, the somewhat positive news about dwindling coronavirus numbers has led to a bounce, and the daily candle now appears to have formed a Doji. If the day’s candle ends as a Doji, this may have a significant impact on current price action. Price is also at the support zone formed by previous lows of 19/20 February 2020. 

The week has a scanty economic calendar. The German Factory Orders is the next piece of news that traders may watch to get some direction the pair. A break of the support zone opens the door for the EURUSD to target the 1.06384 support. However, it has to take a break of this support to confirm further bearishness on the pair, as this would create the lower lows needed to maintain the downtrend. Note that lower highs have already been confirmed by the tops of the March 9 and March 27 candles. Supporting this move would be the downward direction of the moving averages of the Alligator indicator and the RSI.

In contrast, if the COT report’s numbers start to reflect in the price action of the Euro, we can expect the EURUSD to bounce from present levels. Such a move creates a template for a 1-2-3 reversal pattern which could see the EURUSD aiming for the neckline at 1.11442 formed by the March 9 candle. This move has several obstacles on the way at the 1.0884, 1.09421. 1.09932 and 1.10630 resistance areas. Only a break of the 1.11442 neckline would confirm the 1-2-3 reversal and extend the EURUSD’s gains towards the 1.15000 price level (March 9 highs) and beyond. 

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