To open long positions on EUR/USD, you need:
On Friday, there were several profitable signals to enter the market both in the morning and in the afternoon. Let's take a look at the 5-minute charts and figure out the entry points. In my morning forecast, I paid attention to the 1.1234 level and advised you to make decisions on entering the market. A breakthrough and consolidation above this level with a reverse test from top to bottom resulted in forming an excellent entry point into long positions, and then to a sharp rise in the euro to the area of the next resistance at 1.1273, making it possible to take more than 40 points from the market. A false breakout at this level also gave bears an opportunity to prove themselves, which resulted in forming a sell signal. As a result, the euro fell back 30 points. In the second half of the day, the bulls reached the designated target of 1.1317, but failed to get out of this level. The formation of a false breakout there led to an excellent entry point into short positions. As a result, the euro fell by 20 points, but then the demand for risky assets returned.
Quite interesting fundamental statistics will be released today. Bulls will definitely pay attention to the indicator of consumer confidence in the eurozone, which in November may fall more than economists predict - this will put direct pressure on the euro and lead to a fall in the pair. Therefore, bulls need to protect the nearest support at 1.1262, where the moving averages, playing on their side, pass. Only the formation of a false breakout there can create the first point of entry into the market against the downward trend, counting on the continuation of the upward correction of the pair observed at the end of last week. An equally interesting goal will be the resistance at 1.1312, formed at the end of Friday. A breakthrough and a downward test of 1.1312, along with a strong report on the growth of consumer prices in Germany above 5.0% per annum, will provide an excellent entry point into the market with the prospect of renewing highs: 1.1359 and 1.1417. The next target will be 1.1462, where I recommend taking profit. In case EUR/USD falls to 1.1262 and we receive weak fundamental statistics for the euro area, it is best not to rush to buy. I advise you to wait for the next fall in the pair and the formation of a false breakout at the low of 1.1221. You can open long positions in EUR/USD immediately on a rebound from 1.1188, or even lower - from 1.1155, counting on a correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears have retreated so far, but they can return to the market at any moment. Their main task today for the first half of the day is to protect the resistance at 1.1312, above which the European currency cannot be released. Formation of a false breakout there will give an excellent entry point to short positions, and weak data on the consumer confidence indicator will very quickly return bears to the market who want to enter at the current attractive prices. Don't forget about the new strain of coronavirus, which will also keep the couple from a rapid recovery later this year. The dovish statements of European Central President Christine Lagarde will be another problem, which will keep the pressure on the euro. An important task for the EUR/USD bears is to regain control over the support at 1.1262, where the moving averages are currently running. Its breakdown and test from the bottom up will lead to the formation of a signal to open short positions with the prospect of a decline to the 1.1221 area. The next target will be the support at 1.1188, where I recommend taking profits. If the euro grows and the bears are not active at 1.1312, it is better to wait with short positions. The optimal scenario will be short positions when a false breakout is formed in the 1.1359 area. You can open short positions immediately on a rebound from the highs: 1.1417 and 1.1462, counting on a downward correction of 15-20 points.
I recommend for review:
The Commitment of Traders (COT) report for November 16 revealed that both short and long positions increased. However, there were more of the former, which led to the return of the negative delta. And although it continues to balance in one range near the zero mark for quite a long time, this does not help euro bulls in any way. The risk of another surge in the spread of coronavirus and the lockdown of the EU countries has led to a return of pressure on the European currency, which has not yet managed to recover from the continuation of super-soft monetary policy by the European Central Bank, even against the backdrop of inflationary growth. Judging by what is happening, the ECB leaders have taken a fairly correct position. Austria has already returned to quarantine restrictions and strict isolation measures, and the German authorities are considering this - a very strong signal for the further weakening of the euro against the dollar. Meanwhile, in the US, the fact of high inflationary pressure continues to support the US dollar. Many investors are counting on an earlier increase in interest rates from the Federal Reserve next year and are already winning back the market in this direction. The latest November COT report indicated that long non-commercial positions rose from 192,544 to 198,181, while short non-commercial positions also jumped from 188,771 to 202,007. By the end of the week, the total non-commercial net position regained its negative value and amounted to -3,826 against 3,773. The weekly closing price dropped significantly, to the level of 1.1367 against 1.1587.
Indicator signals:
Trading is carried out just above the 30 and 50 daily moving averages, which indicates an attempt by the bulls to continue the upward correction.
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 breakout of the lower border of the indicator in the area of 1.1262 will lead to a major fall in the euro. In case of growth, the upper border of the indicator at 1.1325 will act as 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.
