To open long positions on EUR/USD, you need:
Nothing interesting happened yesterday morning, which cannot be said about the US session. Strong data on the US labor market, which turned out to be better than the forecasts of economists, led to another wave of dollar strengthening. The support at 1.880 was broken, but I did not wait for a reverse test of this level, so I had to miss the downward movement, which then pushed the euro to the target level of 1.1850. Buying on the rebound from this area did not bring much profit, as there was no strong upward reversal, and the market remained under the control of the bears.
Most likely, the euro will continue to fall today, if the bulls are not active in the support area of 1.1842. Today we are waiting for a fairly large amount of fundamental reports on the eurozone economy: in the first half of the day, it is necessary to pay attention to the speech of European Central Bank President Christine Lagarde, who may take a passive position regarding inflation and the bond purchase program, which will negatively affect the euro. The only thing that the bulls can count on today is good data on changes in the volume of retail trade in Germany and the index of business activity in the manufacturing sector of the eurozone countries. If the indicators come out better than forecasted, the bulls will still have a chance for an upward correction. The bulls' primary concern will be to protect the 1.1842 support. Forming a false breakout there generates a signal to open long positions in hopes that EUR/USD would rise to the resistance of 1.1883. It is possible to count on a breakdown of this level, however, I recommend opening long positions in continuation of the euro's growth only after testing it from top to bottom, which creates another buy signal in order to return the pair to the larger resistance at 1.1925, where I recommend taking profit. The next target will be the area of 1.1974. In case the bulls are not active around 1.1842 and we receive inconclusive data for the eurozone countries, it is best not to rush into long positions. I advise you to wait for an update of the 1.1805 support. It is also possible to buy EUR/USD immediately on a rebound from a new monthly low in the 1.1769 area, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears are in full control of the market and the first half of the day will be spent looking into surpassing the 1.1842 support. This low coincides with last month's low, so there are quite a lot of the bulls' stop orders below. Weak data on manufacturing activity in the eurozone in the summer may serve as a reason for the buildup of short positions. A test of the 1.1842 area from the bottom up will create a good signal to open short positions in continuation of the bear market, in hopes that EUR/USD would fall further to a low of 1.1805, where I recommend taking profits. Further support will be the 1.1769 area. If the euro grows in the first half of the day, an equally important task for the bears will be to protect the resistance at 1.1883, where the moving averages are, which are now playing on the side of the bears. Forming a false breakout there creates an entry point for short positions. If the bears are not active there, then it is best to postpone short positions until the test of a larger resistance in the 1.1925 area, where you can immediately sell the pair on a rebound, counting on a downward correction of 15-20 points. The next major resistance is at the 1.1974 high.
The Commitment of Traders (COT) report June 22 showed significant changes: long positions sharply fell and short positions increased. Such changes took place after the Federal Reserve's meeting on interest rates. Let me remind you that during the last meeting, the central bank made the first hints of an earlier increase in interest rates. Some Fed members expect this kind of change as early as 2022. This suggests that in the near future the central bank may begin to wind down its bond purchase program, which will strengthen the US dollar's position on the world stage even more. However, if the European currency falls even further in the near future, then the demand for it will increase even more in anticipation of such measures from the European Central Bank, which, as we all know, has recently been following the Fed's example and with a slight delay. A number of important fundamental reports on the US labor market will be published this week, as well as many speeches by the heads of world central banks that are set to take place, which will help traders decide on the future course of monetary policy. Most likely, the trend towards the strengthening of the US dollar will continue this week, but it will be more and more difficult for the bears to pull down the pair. The COT report indicates that long non-commercial positions fell from 210,816 to 207,863, while short non-commercial positions rose from 92,630 to 118,806. It should be understood that the latest data on activity in the euro manufacturing sector and the service sector indicated that the eurozone economy is on track for strong growth in the summer, which will necessarily affect the prospects for its recovery after the coronavirus pandemic. This is the key to a medium-term upward trend in the European currency. The total non-commercial net position decreased from the level of 118,186 to the level of 89,057. The weekly closing price decreased from the level of 1.2121 to the level of 1.1912.
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 1.1842 will increase pressure on the euro. A breakthrough of the upper border of the indicator around 1.1890 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.
