To open long positions on EUR/USD, you need:
Several signals to enter the market were formed yesterday. Let's take a look at the 5 minute chart and break down all the entry points.
Taking into account that important fundamental reports were not published in the first half of the day, the whole emphasis was on the level of 1.1880. You can clearly see how the bears defended it and formed a false breakout there along with a signal to open short positions in continuation of the bear market. However, it was not possible to surpass the next monthly lows, and after falling by 25 points, the movement ended. Towards the middle of the day, the bears managed to rise above the 1.1880 level, however, there was no reverse test of this area for entering long positions. Against this background, short positions had to be postponed until a false breakout was formed in the resistance area of 1.1920, however, even after that, this did not push the euro to sharply fall, although the bulls also failed to continue the upward correction.
Before talking about further prospects for the EUR/USD movement, let's see what happened in the futures market and how the Commitment of Traders positions have changed. The Commitment of Traders (COT) report June 15 shows that both short and long positions significantly fell, however, the data does not take into account the Federal Reserve's decision on interest rates, so I do not recommend putting a lot of emphasis on these indicators right now. Let me remind you that last week, the euro went back to falling against the US dollar after the Fed's first hints about an earlier increase in interest rates in 2023. It also suggests that the US central bank may soon begin phasing out its bond buying program, which will further strengthen the dollar on the global stage. Inflation data that was recently released for the US and the eurozone suggests that the European Central Bank will not rush to make changes in its policy yet, which also weakens the euro's position. Most likely, the trend towards strengthening of the US dollar will continue this week. The COT report indicates that long non-commercial positions fell from 232,103 to 210,816, while short non-commercial positions fell from 124,890 to 92,630. It should be understood that the lower the European currency falls, the more interest it will challenge traders, as the eurozone economy is aimed at strong growth in the summer, which will certainly affect the prospects for its recovery after the coronavirus pandemic. The total non-commercial net position rose from 107,213 to 118,186. The weekly closing price declined from 1.2190 to 1.2121.
The bulls are close to the resistance at 1.1923, but so far no one is showing signs of being more active. It is possible that today's speech by the representative of the ECB can force the bulls to rise above the range in the morning. However, most likely everyone will be waiting for the statements of Fed Chairman Jerome Powell. The data on the consumer confidence indicator is unlikely to provide serious support to the euro in the first half of the day. The bulls' main task for the European session is to protect the support at 1.1887. Forming a false breakout there generates a signal to open long positions, and in this case, the bulls will aim for the resistance of 1.1923, beyond which it was not possible to get out of yesterday. 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 correction and compensation of the fall that we saw last week. This scenario will lead to renewal of the larger highs of 1.1961 and 1.2003, where I recommend taking profits. In case we receive weak data for the eurozone and the bulls are not active in the 1.1887 area, then you can open short positions on condition of a false breakout from the monthly low of 1.1852. I recommend buying EUR/USD immediately on a rebound only after the first test of the 1.1805 area, 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 in order to do so it is necessary to protect resistance at 1.1923, which the bulls are currently aiming for. Forming a false breakout there, along with weak data on the indicator of consumer confidence in the eurozone, can create a signal to sell the euro in hopes of pulling it down to the middle of the horizontal channel at 1.1887, which is where the moving averages that play on the side of the bulls are. Surpassing this level and testing it from the bottom up can return the pair to the downward trend that was formed in the middle of last week, which will then open the way to the 1.1852 low. Its breakthrough will only be a matter of time. However, it is possible to open short positions there only after this area has been updated from the bottom up, which will open a direct path to the support of 1.1805, where I recommend taking profits. If the bears are not active in the 1.1923 area this morning, then I recommend postponing short positions immediately to a rebound from the resistance at 1.1961, or even higher - from the high of 1.2003, counting on a downward correction of 15-20 points.
Indicator signals:
Trading is carried out above 30 and 50 moving averages, which indicates the likelihood of a further upward correction for the pair.
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 upper border of the indicator in the area of 1.1923 will lead to a new wave of euro growth. A breakthrough of the lower border of the indicator in the area of 1.1887 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.
