EUR/USD 5-Minute Analysis

The EUR/USD currency pair rose on Friday, a movement barely aligned with the fundamental and macroeconomic backdrop. Recall that the day's most important reports — the PCE Index and the University of Michigan Consumer Sentiment Index — were rather lackluster. For example, the PCE Index value for November in annual terms came in at 2.8% against a forecast of 2.9%, unchanged from October. What does this indicate? Essentially, nothing — the index remained flat. Similarly, the Consumer Sentiment Index increased from 71.8 to 74.0, which matched expectations. In any case, an increase in this metric should have strengthened the US dollar rather than weakening it. We believe that Friday's macroeconomic backdrop had no real influence on traders' sentiment.

The rise in the pair was purely technical. According to the current technical picture on the hourly timeframe, the price failed several times to breach the 1.0340–1.0366 area, correcting toward the critical line. On Monday, the price may rebound from this line, leading to a new decline to the 1.0340–1.0366 area. The more attempts are made to break this area, the higher the likelihood it will eventually be breached. We still believe the euro should continue to decline. The only caveat is that a flat or weak volatility may occur during the holiday week.

In the 5-minute timeframe, the price formed two signals on Friday. First, it rebounded from the 1.0340–1.0366 area, allowing traders to open long positions. By the end of the day, the price tested the Kijun-sen line but failed to break it. While opening shorts at that point was an option, doing so right before the weekend is generally not ideal. However, short positions could be considered on Monday.

COT Report

The latest Commitment of Traders (COT) report, dated December 17, shows a clear trend. The net position of non-commercial traders has remained bullish for a long time, but bears have gained the upper hand. Two months ago, the number of open short positions by professional traders surged, causing the net position to turn negative for the first time. This indicates that the euro is now sold more often than bought.

We continue to see no fundamental factors supporting the euro's growth, and technical analysis points to price consolidation — essentially, a flat market. On the weekly timeframe, it is evident that since December 2022, the pair has been trading within the 1.0448–1.1274 range. Therefore, further declines remain more likely. A break below 1.0448 would open new opportunities for a deeper fall.

The red and blue lines on the COT chart have crossed and changed their relative positions, signaling a bearish market trend. During the latest reporting week, the number of longs in the Non-commercial group decreased by 4,700, while shorts decreased by 14,400. As a result, the net position increased by almost 10,000, but this does not alter the overall bearish trend.

EUR/USD 1-Hour Analysis

The pair completed a three-week correction on the hourly timeframe and resumed its downward movement. Given the Federal Reserve's extremely hawkish stance, we believe the decline can continue calmly in the coming days. The Fed may reduce rates only 1–2 times in 2025, much more hawkish than the market already priced in. We still believe there are no grounds for a significant rise in the euro.

For December 23, we highlight the following trading levels: 1.0269, 1.0340–1.0366, 1.0485, 1.0585, 1.0658–1.0669, 1.0757, 1.0797, 1.0843, 1.0889, 1.0935, as well as the Senkou Span B line (1.0541) and the Kijun-sen line (1.0440). The lines of the Ichimoku indicator may shift during the day, which should be considered when identifying trading signals. Don't forget to set a Stop Loss to break even if the price moves 15 pips in the right direction. This will protect against potential losses if the signal turns out to be false.

No significant events or reports are scheduled in either the Eurozone or the United States on Monday. Thus, we do not expect strong movements. The price may gradually drift back toward the 1.0340–1.0366 area.

Illustration Explanations:

Support and Resistance Levels (thick red lines): Key areas where price movement might stall. Not sources of trading signals.

Kijun-sen and Senkou Span B Lines: Ichimoku indicator lines transferred from the H4 timeframe to the hourly chart, serving as strong levels.

Extreme Levels (thin red lines): Points where the price has previously rebounded. They can serve as trading signal sources.

Yellow Lines: Trendlines, channels, or other technical patterns.

Indicator 1 on COT Charts: Reflects the net position size of each trader category.