The European Central Bank (ECB) unveils a new monetary policy decision this Thursday, June 5, and the consensus is for further cuts in all three ECB interest rates. The ECB's key rate (the main rate at which banks refinance with the ECB) currently stands at 2.40% and should be cut to 2.15% according to the analyst consensus, in other words, a return of the ECB's key rate to the neutral zone for the Eurozone economy (neither restrictive nor accommodative). However, institutional traders are still predominantly bullish on the euro-dollar rate, so let's take stock of the overall technical situation.
1) Institutional traders are still buying the euro-dollar rate (EUR/USD)
Every Friday, the CFTC's Commitment Of Traders (COT) report provides access to the positioning of institutional traders (asset management traders and hedge fund traders) on EUR/USD futures contracts. Net positioning represents the difference between buy and sell positions. If the net position curve is above zero and following an upward trend, then institutional investors are buying. This is precisely the case for the EUR/USD institutional net position, with over 60% of institutional investors buying. As for the absolute net position, it is well above zero and has been trending upwards for the past three months.
The chart below shows the weekly Japanese candlesticks for the EUR/USD rate, as well as the net position of institutional traders on the EUR/USD rate in the form of the percentage of buy positions.
The second chart below is a histogram revealing the institutional net position in absolute terms (yellow line), which is following an upward trend and broke through descending resistance several weeks ago.
2) In terms of technical analysis, the EUR/USD rate is backed by support at $1.10/$1.12, but remains covered by major resistance at $1.15.
The monthly chart gives an opinion on the medium/long-term trend. A study of the monthly chart of the euro-dollar exchange rate highlights a bullish signal that has been given over the last two months. This is the bullish technical breakout of a downtrend line that joins all the most prominent peaks since the 2008 financial crisis. If this graphic signal is not invalidated by a bearish reintegration, then the trend will remain bullish for the euro-dollar rate in the medium term, with corrections still possible in the short term.
This market view would therefore be invalidated in the event of a break of support at $1.10/$1.12 on the basis of a minimum weekly close.
Long-term chart showing monthly Japanese candlesticks for the euro-dollar rate, highlighting the bullish technical breakout of resistance in place since the 2008 financial crisis.
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
1) Institutional traders are still buying the euro-dollar rate (EUR/USD)
Every Friday, the CFTC's Commitment Of Traders (COT) report provides access to the positioning of institutional traders (asset management traders and hedge fund traders) on EUR/USD futures contracts. Net positioning represents the difference between buy and sell positions. If the net position curve is above zero and following an upward trend, then institutional investors are buying. This is precisely the case for the EUR/USD institutional net position, with over 60% of institutional investors buying. As for the absolute net position, it is well above zero and has been trending upwards for the past three months.
The chart below shows the weekly Japanese candlesticks for the EUR/USD rate, as well as the net position of institutional traders on the EUR/USD rate in the form of the percentage of buy positions.
The second chart below is a histogram revealing the institutional net position in absolute terms (yellow line), which is following an upward trend and broke through descending resistance several weeks ago.
2) In terms of technical analysis, the EUR/USD rate is backed by support at $1.10/$1.12, but remains covered by major resistance at $1.15.
The monthly chart gives an opinion on the medium/long-term trend. A study of the monthly chart of the euro-dollar exchange rate highlights a bullish signal that has been given over the last two months. This is the bullish technical breakout of a downtrend line that joins all the most prominent peaks since the 2008 financial crisis. If this graphic signal is not invalidated by a bearish reintegration, then the trend will remain bullish for the euro-dollar rate in the medium term, with corrections still possible in the short term.
This market view would therefore be invalidated in the event of a break of support at $1.10/$1.12 on the basis of a minimum weekly close.
Long-term chart showing monthly Japanese candlesticks for the euro-dollar rate, highlighting the bullish technical breakout of resistance in place since the 2008 financial crisis.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.