EUR/USD 5-Minute Analysis

On Monday, the EUR/USD currency pair initially showed a decent rise, followed by a sharp decline. Trader emotions once again drove the growth of the euro. On Sunday, the results of Germany's parliamentary elections became known, revealing that Scholz's party had suffered a defeat. Traders interpreted this outcome positively, leading to a surge in euro purchases during the early hours of Monday. However, as the day progressed, emotions settled, and the market remembered that a change in leadership does not guarantee shifts in political or economic policies. Moreover, any potential changes would take considerable time to materialize. As a result, the euro quickly returned to its starting position before the latest growth.

From a technical standpoint, nothing changed on Monday. The price remains above the trendline and may break below it soon. Currently, the price is also near the upper boundary of a flat range on the daily time frame. While this range is not visible on the hourly chart, a decline now appears more likely due to technical reasons—no macroeconomic or fundamental factors justifying a new rise for the euro.

Despite Monday's movements being far from obvious, they still provided good trading opportunities. During the Asian session, the price rebounded from the 1.0524 level and had only slightly moved from this point when the European session opened. Therefore, traders could confidently open short positions. During the U.S. session, the price reached the 1.0461 level and the Kijun-sen line, from which it rebounded. This provided an opportunity to close short positions with a profit of approximately 45 pips.

COT Report

The latest COT report, dated February 18, indicates that the net position of non-commercial traders remained bullish for an extended period. However, bears have recently gained dominance in the market. Three months ago, there was a significant increase in the number of short positions taken by professional traders, resulting in a negative net position for the first time in a long while. This trend suggests that the euro is being sold more frequently than it is being purchased, leading to a prevailing bearish sentiment.

Currently, there are no fundamental factors supporting a strengthening of the euro. The upward movement observed in the weekly timeframe is minimal and appears to be a mere correction. The currency pair may continue to correct for several weeks or even months; however, this does not alter the long-term downtrend that has persisted for 16 years.

At present, the red and blue lines in the COT report have crossed and switched positions, indicating a bearish trend in the market. During the most recent reporting week, the number of long positions in the "Non-commercial" group increased by 4,700, while short positions decreased by 8,200. As a result, the net position grew by 12,900 contracts; nonetheless, this change does not significantly impact the overall market sentiment.

EUR/USD 1-Hour Analysis

On the hourly time frame, the pair continues its local uptrend. We believe a decline will resume in the medium term since the Federal Reserve may only cut rates once or twice in 2025, while the ECB will likely implement more reductions. However, there may be one or two more upward movements in the short term, as the correction on the daily time frame could take a long time and remain complex. The euro still lacks strong fundamental reasons to rise, and 80% of its recent growth is purely technical.

For February 25, 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, 1.0843, along with the Senkou Span B line (1.0400) and the Kijun-sen line (1.0464). The Ichimoku indicator lines may shift throughout the day, so this should be considered when identifying trading signals. It is important to set a Stop Loss at breakeven if the price moves 15 pips in the right direction, as this will protect against potential losses if the signal turns out to be false.

On Tuesday, the only notable event in the Eurozone was the third estimate of Germany's Q4 GDP report. However, this figure is unlikely to differ from the previous two estimates, so no significant market reaction is expected. The U.S. economic calendar is empty.

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.