To open long positions on EUR/USD, you need:
A good long entry point formed yesterday afternoon, pushing the European currency back to its weekly highs. Let's take a look at the 5-minute chart. You can see how the bulls are forming a false breakout in the support area of 1.1787 and are quickly regaining control of the market, thereby leading the pair to its growth by 50 points up to the high of 1.1842, which is where the main struggle will take place today. The hourly chart also clearly shows how the bulls did not allow the closing price to fall below the 1.1787 level. As a result, from a technical point of view, nothing has changed for either of them. Trading remained in the side channel of 1.1787-1.1842, from which an exit is required. The best scenario is to wait until the pair falls to the major support of 1.1787. Forming a false breakout in that area will be a signal to open long positions while counting on a recovery to a high of 1.1842. However, an equally important task for the bulls is a breakout and settling at the 1.1842 level, as this will lead to a complete reversal of the downward correction and also open the way to the high of 1.1884. The resistance of 1.1920 will be the long-term goal of the buyers, where I recommend taking profits. But for such an active growth, we need good eurozone macroeconomic data, which will not be released today. Federal Reserve Chairman Jerome Powell's speech may help the euro grow. His ultra-soft tone on monetary policy is sure to weaken the US dollar's position. If buyers are not active in the support area of 1.1787 when the pair decreases, it is best to postpone purchases until last week's low has been updated in the area of 1.1755, or you can open long positions immediately for a rebound from the support of 1.1714 in anticipation a correction of 20-30 points within the day, since the market is still under the bears' control.
It is also worth recalling that the Commitment of Traders (COT) reports for August 18 marked a reduction in long non-commercial positions from the level of 266,078 to the level of 259,244, while short non-commercial positions also decreased from the level of 66,327 to 62,301. Given that the closing of long positions turned out to be much larger, as a result, the positive non-commercial net position sharply fell to 196,943, compared to 199,751 a week earlier. However, such changes did not seriously affect the balance of power in the market, and most likely the demand for the euro will return, after a slight correction of the US dollar.
To open short positions on EUR/USD, you need:
Sellers of the euro will try to break below the support of 1.1787. Settling below this level forms a good entry point into short positions while we count on continuing the downward correction to the area of last week's low at 1.1755, where I recommend taking profits. Support for 1.1714 will be the long-term goal. But do not disregard the bulls' attempts to return to the market, which pulled the pair quite close to the 1.1842 level. It is best to open short positions from it only after forming a false breakout. If bears are not active, the market can quickly switch to the side of buyers. In this case, I recommend selling EUR/USD immediately on a rebound from the high of 1.1884, counting on a correction of 20-30 points within the day. In case the euro actively grows Powell's speech, it is better to wait for the high of 1.1920 has been updated and sell the euro from there.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates a small market uncertainty with further direction.
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 classic daily moving averages on the D1 daily chart.
Bollinger Bands
A breakout of the lower border of the indicator around 1.1790 will increase pressure on the euro. A breakout of the upper border of the indicator in the 1.1850 area will lead to an upward correction.
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.
- Total non-commercial net position is the difference between short and long positions of non-commercial traders.
