To open long positions on EUR/USD, you need:
Despite the relatively low volatility yesterday afternoon, we still managed to wait for a signal to form on opening long positions. Weak data on the US consumer confidence indicator did not exert much pressure on the European currency, which led to forming a false breakout in the support area of 1.1704, which is clearly seen on the 5-minute chart. However, this entry point only managed to return EUR/USD to the middle of the side channel, where trading is currently being conducted. Nothing has changed from a technical point of view. Most likely, the bulls will try to regain the resistance of 1.1763 in the morning, but important fundamental data will not be released in the European session, which could limit the upward potential of the pair. After consolidating above the 1.1763 range, you can expect to update the weekly high in the 1.1802 area, as well as a test of the long-term resistance of 1.1830, where I recommend taking profits. If the pressure on EUR/USD returns in the morning, and most likely it will, as traders will be preparing for the results of the Federal Reserve's monetary policy meeting, then the bulls will have to protect the support of 1.1704. However, I recommend opening long positions from there only after forming a false breakout. It is best to buy euros immediately on a rebound from the low of 1.1648 in the expectation of a correction of 25-30 points within the day.
Let me remind you that the Commitment of Traders (COT) reports for July 21 recorded a sharp increase in long positions and a reduction in short ones, which indicates the return of investors' interest in risky assets amid confusion that is happening in the US due to the coronavirus, the presidential election and the fall in Treasury yields. The report shows an increase in long non-commercial positions from 194,252 to the level of 204,185, while short non-commercial positions decreased from the level of 83,340 to the level of 79,138. As a result, the positive non-commercial net position increased to 125,047, against 110,912, which indicates an increase in interest in buying risky assets even at the current, rather high prices.
To open short positions on EUR/USD, you need:
Bears made another unsuccessful attempt to break below the support of 1.1704 yesterday, however, the more these tests occur, the more likely it is that the pair will break below this range. But it is important to understand that consolidating below this level forms a good entry point for opening short positions while expecting EUR/USD to fall to a low of 1.1648. A more distant goal will be the 1.1591 area, where I recommend taking profits. Another interesting entry point will be forming a false breakout in the resistance area of 1.1763, which may occur today in the first half of the day amid the absence of important fundamental data. Also, waiting for the results of the Fed meeting will restrain demand for the European currency. If sellers are not active in the 1.1763 area, I advise you to postpone short positions until the high of 1.1802 has been updated, or even sell EUR/USD immediately on the rebound from the resistance of 1.1830 based on a correction of 25-30 points within the day.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates the formation of a downward correction in the short term.
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 D1 daily chart.
Bollinger Bands
The volatility is very low, which does not provide signals to enter the market.
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) Fast EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial traders are speculators, 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.
- The total non-commercial net position is the difference between short and long positions of non-commercial traders.
