To open long positions on EUR/USD, you need:
At the end of last week, there were no people willing to buy euros in the area of the weekly high. Let's take a look at the 5 minute chart and talk about what happened. The first half of the day was with minimal volatility, but the data on the US economy shook the market. As a result, there was a breakdown and consolidation above the resistance of 1.1961, as well as a signal to buy the euro. However, there were no people willing to open long positions at the highs, which quickly led to a decline in the pair back below the level of 1.1961 and hit the stop orders, taking losses.
Given the low volatility of the market, the pressure on the euro may continue today. In the morning, representatives of the European Central Bank speak, so we are unlikely to see a strong directional movement in a certain direction. There are no fundamental reports, so we will again trade in a narrow sideways channel. The initial task of buyers will be to form a false breakout in the support area at 1.1914, which will generate a signal to open long positions in the expectation of EUR/USD growth in the area of the midpoint of the 1.1947 horizontal channel, as well as its breakdown. A breakthrough and test of this level from top to bottom may form an additional signal to open long positions in order to restore the pair to the larger resistance 1.1974, which was formed at the end of last week. I recommend taking profits there. The next target will be the area of 1.2032. In case of weak buying activity in the 1.1914 area, it is best not to rush into purchases. I recommend waiting for the 1.1884 support update. It is possible to buy EUR/USD immediately on a rebound only from the low of 1.1852, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
An important task for the bears in the first half of the day will be the breakthrough of the 1.1914 support, which the bears have not been able to break through for four trading days. The statements of the representatives of the European Central Bank may negatively affect the euro, which will lead to a breakthrough of the level of 1.1914. A test of this area from the bottom up will form a good signal to open short positions with the aim of further falling EUR/USD to the lows of 1.1884 and 1.1852. I recommend taking profits there. In case the euro grows during the European session, an equally important task is to protect the resistance at 1.1947. Forming a false breakout there creates an entry point into short positions in the euro. If the bears are not active there, then it is best to postpone short positions until the test of the upper border of the horizontal channel at 1.1974, where you can immediately sell the pair on a rebound, counting on a downward correction of 15-20 points. The next major selling resistance comes at 1.2032 high.
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.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the 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
A breakthrough of the lower border of the indicator in the area of 1.1914 will increase pressure on the euro. Surpassing the upper border of the indicator around 1.1960 will lead to a new wave of euro growth.
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.
