To open long positions on EUR/USD, you need:
The euro was under pressure last Friday during the US session after the bulls failed to build an upward correction. Let's take a look at the 5 minute chart and see what happened.
In the first half of the day, the bears made an unsuccessful attempt to push the pair to new weekly lows, after which the demand for the euro returned. Forming a false breakout in the area of resistance at 1.1923 resulted in creating an entry point to short positions, but after a small movement of 15 points, the bears were no longer active. But with the arrival of American traders on the market, the pressure on the euro returned, and we saw a good movement from the pair, down to the support area of 1.1880. After a breakthrough of this level and its test from the bottom up, there was another signal to open short positions in continuation of the bear market, which brought about 35 more points of profit.
While divergence is forming on the MACD indicator and the indicator remains in the oversold area, any short positions on the euro at new local lows will be quite problematic. Therefore, the bulls have a chance to build an upward correction, which is unlikely to last long. The main task of the bulls in the first half of the day is to protect the support at 1.1839. Only a good report from the German Bundesbank and the forecast for the economy, along with a false breakout there, can create a signal to open long positions in hopes of a recovery to the resistance area of 1.1880, which the bulls missed last Friday as support. A breakthrough and a test of this level from top to bottom may create another signal to open long positions in order to restore the pair to a larger resistance at 1.1923, where I recommend taking profits. The next target will be the area of 1.1961. In case the bulls are not that active around 1.1839, I recommend not to rush into long positions. It is best to wait until the next support at 1.1805 is updated, or to buy EUR/USD to rebound off the 1.1769 low counting on an upward correction of 15-20 points within the day. Remember that the trend remains bearish, so trading against it is not a good idea.
To open short positions on EUR/USD, you need:
The bears need to defend resistance at 1.1880, which they managed to win back last Friday. Moving averages, playing on the side of the bears, also pass slightly above this level. There are a number of stop orders of speculative sellers betting on a further fall in the euro above this level, which is why its protection is so important for bears. Forming a false breakout at the level of 1.1880 in the first half of the day will be an excellent signal to open short positions in continuation of the downward trend formed in the middle of last week. But a more important task is to break through the low of 1.1839, where a divergence is now forming on the MACD indicator, seriously limiting the further downward potential of the pair. A breakthrough and test of this area from the bottom up on the volume will create a good signal to open short positions, as we count on EUR/USD to further fall to new lows of 1.1805 and 1.1769, where I recommend taking profits. The speech of the European Central Bank President Christine Lagarde and her statements related to monetary policy may sustain the bear market. If the bears are not active in the 1.1880 area today, I recommend postponing short positions until the resistance test at 1.1923, where you can immediately sell the pair on a rebound, counting on a downward correction of 15-20 points. It is best to trade further with the trend and go short from large resistances.
The Commitment of Traders (COT) report June 8 shows that both long and short positions decreased. This indicated profit taking and traders leaving the market ahead of the European Central Bank's important meeting, following which there were no changes in monetary policy. Many were worried about what would become of the bond purchase program, but it remained unchanged, which did not allow the bulls to maintain control of the market. The pair is now at risk of significantly adjusting its positions ahead of an important Federal Reserve meeting, the results of which will set the market's direction for the next few weeks. The dollar can only hope that this summer the Fed will start talking in all seriousness about reducing the volume of bond purchases. If this does not happen, risk appetite will increase and we will see a recovery in the euro. The COT report indicated that long non-commercial positions declined from 237,360 to 232,103, while short non-commercial positions also dropped from 128,038 to 124,890. The more the European currency falls, the more interest it will attract, since the eurozone economy will demonstrate excellent growth rates in the summer, which will certainly affect the prospects for its recovery after the coronavirus pandemic. The total non-commercial net position declined from 109,322 to 107,213. The weekly closing price also declined from 1.22326 to 1.21907.
Indicator signals:
Trading is carried out below 30 and 50 moving averages, which indicates a bearish market.
Moving averages
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 lower border of the indicator in the area of 1.1839 will increase pressure on the euro. In case of an upward correction, the upper border of the indicator in the area of 1.1905 will act as a resistance.
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.
