EUR/USD 5-Minute Analysis

The EUR/USD currency pair effortlessly regained most of Monday's losses. On Monday, it was reported that import tariffs between China and the U.S. had been reduced, which can legitimately be seen as a de-escalation of the trade war. However, the celebration for the dollar was very short-lived. We assumed that the U.S. currency might continue strengthening on Tuesday, since the initial agreement between China and the U.S. was significant. However, on Tuesday, U.S. inflation unexpectedly declined in April, once again increasing the chances of monetary policy easing by the Federal Reserve. Shortly afterward, it emerged that Donald Trump was dissatisfied with the European Union, which, in his view, is unwilling to offer trade terms acceptable to the U.S. As a result, Trump is considering introducing new tariffs against the EU to pressure Brussels to become more cooperative.

It appears that the U.S.-China agreement was more of an illusion than a reality. On one hand, it's a positive development for the dollar. On the other hand, far more negative factors remain, and the market tends to focus on the negative. Last week, the market barely reacted to the Fed meeting or the signing of the trade deal with the UK. However, the inflation report and Trump's new threats sparked a sharp dollar sell-off. Despite positive news about trade ceasefires, the market appears unwilling to purchase the dollar.

On the 5-minute chart, the price moved almost exclusively in one direction all day. The first buy signal was generated overnight near the 1.1092 level, so from the outset, the market was positioned to sell the dollar. During the U.S. session, the 1.1147 level was broken, and the dollar's decline continued. Nevertheless, we do not believe that the U.S. dollar will keep falling without a concrete reason, unless Trump actually imposes new tariffs on the EU.

COT Report

The latest COT (Commitment of Traders) report is dated May 6. As shown in the chart above, the net position of non-commercial traders remained bullish for a long time. Bears briefly took the lead but quickly lost it. Since Trump took office, the dollar has been in free fall. We can't say with certainty that the dollar's decline will continue, and the COT reports reflect the actual sentiment of large players, which can change rapidly under current circumstances.

We still see no fundamental factors for the euro to strengthen, but one major factor remains for the dollar to fall. The pair may continue to correct for several more weeks or months, but a 16-year downtrend will not reverse quickly. Once Trump concludes his trade wars, the dollar may return to growth.

The red and blue lines have crossed again, indicating a return to a bullish trend. Over the last reporting week, the number of longs among the "non-commercial" group decreased by 2,200, and the number of shorts decreased by 2,100. Accordingly, the net position remained virtually unchanged for the week.

EUR/USD 1-Hour Analysis

On the hourly timeframe, the EUR/USD pair began a fairly strong downtrend, but its future still hinges entirely on developments in the global trade war. If trade agreements are signed and tariffs reduced, the U.S. dollar will likely continue climbing back to the levels from which it began its recent decline. Technical analysis currently plays a minimal role—everything depends on trade-related headlines.

For May 14, the key trading levels are: 1.0823, 1.0886, 1.0949, 1.1006, 1.1092, 1.1147, 1.1185, 1.1234, 1.1274, 1.1321, 1.1426, and 1.1534, along with the Senkou Span B line (1.1346) and the Kijun-sen line (1.1218). The Ichimoku indicator lines may shift during the day, which should be considered when identifying trade signals. Don't forget to move your Stop Loss to breakeven once the price moves 15 pips in the correct direction. This helps protect against potential losses if the signal turns out to be false.

On Wednesday, Germany's inflation data will be released in the eurozone, but it is unlikely to have much impact under the current circumstances. The U.S. economic calendar is empty, so we do not expect strong market moves—unless Trump returns to the spotlight again.

Illustration Explanations:

• Support and resistance price levels – thick red lines where movement may end. They are not trading signal sources.
• Kijun-sen and Senkou Span B lines—These are strong Ichimoku indicator lines transferred to the hourly timeframe from the 4-hour one.
• Extremum levels – thin red lines where the price has previously rebounded. These act as trading signal sources.
• Yellow lines – trend lines, trend channels, and other technical patterns.
• COT Indicator 1 on the charts – the size of the net position for each category of traders.