Analysis of EUR/USD 5M

The EUR/USD currency pair traded very weakly, mostly sideways, on Friday. The macroeconomic and fundamental backdrop was virtually absent that day, and by the end of the week, traders simply stopped paying attention to geopolitics. The reason is that during the week, an enormous amount of information came in, much of it contradictory. The weekend began and... Donald Trump once again stated that a deal with Iran has essentially been reached. Of course, this is not about a full ceasefire, but rather a memorandum and mutual understanding. This memorandum has not yet been signed; it has only been agreed upon. Nevertheless, the U.S. president announced that the Strait of Hormuz will soon be opened. We will discuss all aspects of the agreement in our fundamental articles, but Monday might open with a decline of the dollar, as the market may react favorably to this news. In recent weeks, the dollar has lost its momentum, so a rise in the current circumstances would be reasonable.

Technically, the hourly timeframe retains a downward trend. This will remain as long as the price does not break above the Senkou Span B line. On Monday, the euro needs to overcome the area of 1.1615-1.1625 to expect growth towards the Senkou Span B line. Everything will depend on whether the memorandum is actually signed and whether it leads to the unlocking of the Strait of Hormuz.

On the 5-minute timeframe on Friday, four sell signals were generated in the area of 1.1615-1.1625, but the movement throughout the day was practically sideways, so none of the signals turned out to be false, but none of them allowed for significant profit either.

Analysis of EUR/USD 4H

On the 4-hour timeframe using the ICT trading system, the price tested the area of 1.1658-1.1667 on Tuesday, which was a "bearish" FVG, generating a sell signal that could be executed. During the decline on Wednesday, a new bearish FVG was formed in the area of 1.1628-1.1636, which reacted on Thursday and generated another sell signal. Thus, during the current downward trend, traders had at least three opportunities to open profitable short positions. On Thursday evening, the pair removed liquidity from previous lows and formed a rather weak order block. A reaction to this order block was received on Friday evening, so the new week may start with a rise in the European currency quotes and a trend reversal at the 1.1645 level.

Analysis of EUR/USD 1H

On the hourly timeframe, the EUR/USD pair continues to form a downward trend. The situation in the Middle East remains tense, and it is not getting worse, while Washington and Tehran may sign a preliminary agreement at the beginning of the new week. If no new signs of escalation in the Middle East emerge and the memorandum is indeed signed, the dollar will begin to lose ground.

For May 25, we highlight the following levels for trading: 1.1362, 1.1426, 1.1542, 1.1615-1.1625, 1.1657-1.1666, 1.1750-1.1760, 1.1786, 1.1830-1.1837, 1.1907-1.1922, as well as the Senkou Span B line (1.1686) and Kijun-sen (1.1620). The Ichimoku indicator's lines may move throughout the day, which should be taken into account when determining trading signals. Do not forget to set Stop Loss orders to breakeven if the price moves in the correct direction by 15 pips. This will protect against potential losses if the signal turns out to be false.

On Monday, there are no important events or reports planned in the EU or the U.S., but the day may still be quite volatile due to geopolitical news from the weekend.

Trading Recommendations:

Today, traders can open new short positions targeting 1.1542 if the price bounces from the 1.1615-1.1625 area. Long positions can be opened if the price consolidates above the 1.1615-1.1625 area, with targets at 1.1657-1.1666 and the Senkou Span B line. On the 4-hour timeframe, long positions are relevant after a buy signal is formed in the order block.

Explanations for Illustrations:

Price support and resistance levels – thick red lines, around which movement may conclude. They are not sources of trading signals.

Kijun-sen and Senkou Span B lines – lines of the Ichimoku indicator moved to the hourly timeframe from the 4-hour one. They are strong lines.

Extreme levels – thin red lines from which the price previously bounced. They are sources of trading signals.

Yellow lines – trend lines, trend channels, and any other technical patterns.

CHOCH – break in the trend structure.

Liquidity – liquidity, stop loss, and pending orders that market makers use to establish their positions.

FVG – price inefficiency area. Prices pass through such areas very quickly, indicating a complete absence of one side in the market. Subsequently, the price tends to return and react from these areas, continuing the main trend.

IFVG – inverted price inefficiency area. After returning to such an area, the price does not react to it; instead, it impulsively breaks through and then tests from the other side.

OB – order block. A candle in which the market maker opened a position to take liquidity and establish its own position in the opposite direction.