To open long positions on EUR/USD, you need:
Yesterday there were several signals to enter the market, but the second half of the day was more profitable than the first. Let's take a look at the 5 minute charts and understand the entry points.
A report on producer price inflation in Germany came out during the European session, to which the euro reacted by slightly rising, but the bears managed to protect the resistance at 1.2199 for the first time, forming a false breakout there and creating a signal to open short positions. However, there was no succeeding sharp downward movement, formed on Wednesday after the Federal Reserve minutes, and the pair only passed around 15 points, afterwards the movement stopped. I also paid attention to the 1.2199 level in my afternoon forecast and advised you to act from it. The chart clearly shows how the bulls surpassed this range from the second time and settled on it, testing it from top to bottom, creating an excellent entry point into long positions there. As a result, the upward movement was more than 30 points.
The euro may continue to strengthen today, but in order to do so, traders should be pleased with the good fundamental reports on activity in the manufacturing and services sectors of the eurozone countries in May this year. The speech of the President of the European Central Bank Christine Lagarde and the Eurogroup meeting will also be the focus, which could lead to a rather serious surge in market volatility and further strengthening of the euro. Bulls will aim for resistance at 1.2243 during the European session. A breakthrough and test of this area from top to bottom can create a point of entry into long positions in continuation of the upward trend, counting on the renewal of the next monthly high to the area of 1.2294, where I recommend taking profits. The next target will be the 1.2347 level. A more optimal scenario would be a downward correction of EUR/USD to the support area of 1.2205, where the moving averages, playing on the side of buyers, pass. Forming a false breakout there will be a good entry point into long positions in hopes of continuing the bull market. In case we receive weak data for the eurozone and the bulls are not active in the support area of 1.2205, then you can safely open short positions from a large low in the area of 1.2163, or even lower - in the area of 1.2103, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears will fight to regain control of the market, and so it is necessary to protect the large resistance at 1.22430, which the bulls are aiming for. Forming a false breakout there creates a new signal to sell the euro for the purpose of pulling it down to the area of the middle border of the horizontal channel at 1.2205, where the moving averages are located, playing for the euro bulls. Surpassing this level will pull the pair into a downward correction, which, at least temporarily, will limit the succeeding bull market. An equally important task is to settle below the 1.2205 range. A disappointing report on the recovery of activity in the eurozone and an update of the 1.2205 level from the bottom up can create an additional signal to sell the euro in order to return to the lower border of the horizontal channel at 1.2163, where I recommend taking profits. The next target will be the low of 1.2103, but such a scenario is hardly possible without serious market shocks. If bears are not active at the 1.2243 level in the first half of the day, then I recommend refraining from short positions immediately to a rebound from a large resistance at 1.2294, counting on a downward correction of 15-20 points. The next serious level is at a new local high in the area of 1.2347.
The Commitment of Traders (COT) report for May 11 revealed that both short and long positions have increased, but this time there were more buyers, which caused the overall non-commercial position to rise. Last week, everyone was waiting for the US inflation report, which set the tone. Its sharp rise only provided temporary support to the US dollar, but traders managed to take advantage of this moment to open long positions after the EUR/USD pair corrected downward. Apparently, news that the Federal Reserve is going to raise interest rates is the only thing that can push the dollar to significantly rise. Until then can the demand for risky assets prevail, which will help the euro in the short term and further renew its monthly highs. The COT report indicated that long non-commercial positions jumped from 206,472 to 223,387, while short non-commercial positions rose from 121,643 to 129,480. This indicates an influx of new buyers that expect the euro's growth, however with each renewal of the highs, there are more and more people willing to sell. The total non-commercial net position rose from 84,829 to 93,907. The weekly closing price also increased significantly from 1.20591 to 1.21406.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates the interception of the initiative on the part of the euro buyers.
Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
Surpassing the upper border of the indicator in the area of 1.2243 will lead to a new wave of euro growth. Surpassing the lower border of the indicator in the area of 1.2190 will increase the pressure on the pair.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
- MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions represent the total long open position of non-commercial traders.
- Short non-commercial positions represent the total short open position of non-commercial traders.
- Total non-commercial net position is the difference between short and long positions of non-commercial traders.
