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.
I paid attention to the 1.2213 level in my forecast for the first half of the day and advised you to make decisions on entering the market. You could clearly see how the bears are making a successful attempt to settle below this range, the test of which from the bottom up leads to creating a signal to open short positions. As a result of the euro's decline, the target level of 1.2182 was tested, where I recommended taking profits. The profit was about 30 points.
In the second half of the day, we did not reach the support at 1.2162 to form a false breakout there, so I had to miss the upward correction of the euro. The resistance at 1.2189 grabbed our attention, where after an unsuccessful attempt to get above this range, a signal to sell the euro was formed. However, it led to losses, as the pair did not go further along the downward trend within the day.
At the moment, the bulls' task is to go beyond the level of 1.2217, on which a lot depends. There are also moving averages above this range, which play on the side of the bears. The report on activity in the service sector of the eurozone countries, which will be published in the morning, can possibly provide help to the bulls. If the results exceed the forecasts of economists, it will be a reason to be more active at the resistance level of 1.2217. In this case, we will see a breakthrough and consolidation above this range, which will lead to forming a signal to open long positions in hopes of rising to a high like 1.2249, where I recommend taking profits. The next target will be the area of 1.2283, but we will be able to break through to it only after the US labor market report has been published. If traders are disappointed with it, and the data does not exceed the forecasts of economists, then the pressure on the euro could return. In this case, a more optimal scenario for building up long positions would be to form a false breakout in the support area of 1.2187. I recommend buying EUR/USD immediately on a rebound only after updating the low of the week in the area of 1.2159, counting on an upward correction of 15-20 points within the day. The next major support is seen only around 1.2134.
To open short positions on EUR/USD, you need:
The bears will fight to continue the downward correction that they formed yesterday morning, but which was quickly won back during the US session after the statements of the representatives of the European Central Bank on the subject of monetary policy. The initial challenge will be to protect resistance at 1.2217, where the euro was capped yesterday. Forming a false breakout there creates a new signal to sell EUR/USD, counting on a further decline in the pair. A disappointing report on the services sector will put pressure on the pair, which can push it to fall to the support area of 1.2187, where I recommend taking profit. A breakthrough and test of this range from the bottom up can create an additional entry point into short positions, counting on an exit to the 1.2159 low. If the bears are not active in the area of 1.2217, I recommend postponing short positions until the resistance of 1.2249 is updated, where you can open short positions immediately on a rebound, counting on a downward correction of 15-20 points within the day. The next major resistance comes only at a new local high around 1.2283.
The Commitment of Traders (COT) report for May 25 revealed that long positions increased while short ones decreased, which indicates a growth in demand for the European currency before the start of the last month of the second quarter of this year. It is expected that the European economy will show particularly strong growth in the summer, which will lead to a new growth for the euro in the area of annual highs. Data on the growth rate of the US economy in the first quarter of 2021 did not particularly surprise traders last week, which caused the dollar to remain under pressure. Any strong movements of the EUR/USD pair are now perceived by traders as a good opportunity to gain long positions in continuation of the bull market. Apparently, only the news that the Federal Reserve is seriously going to reduce the volume of bond purchases can lead to a serious increase in the US dollar, but we will know about this only by mid-June. Up to this point, every time the pair declines, the demand for risky assets will return. The COT report shows that long non-commercial positions jumped from 232,330 to 236,103, while short non-commercial positions fell from 132,472 to 132,103. This indicates an influx of new buyers in hopes of continued growth of the euro, and a wait-and-see attitude on the bears' part. The bulls accumulate long positions given the fact that the pair has been standing at local highs for quite a long time, but the bears are gradually getting rid of the euro. This indicates a possible breakdown of monthly highs in the near future and the continuation of the euro's growth. The total non-commercial net position increased from 99,858 to 104,000. The weekly closing price also increased from 1.21564 to 1.22142.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates an attempt by the bulls to regain their position in the market after yesterday's large sale of the pound.
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
Growth will be limited in the area of the upper level of the indicator in the area of 1.2225. In case the pair falls, support will be provided by the lower border of the indicator in the area of 1.2180.
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.
