To open long positions on EUR/USD, you need:
Several interesting signals to enter the market were formed yesterday. Let's take a look at the 5 minute chart and break down the entry points. In the first half of the day I paid attention to the level 1.1593 and recommended making decisions from it. It is clearly seen how the formation of a false breakout and an unsuccessful attempt to break through the level of 1.1593 leads to creating a signal to sell the euro, after which the pair falls by about 20 points. Considering the low volatility in the first half of the day, the movement amounted to 2/3 of it. During the US session, amid weak data on industrial production in the US, the euro bulls managed to recapture the level of 1.1593, and a reverse test of this range leads to forming a buy signal. As a result, one could observe an active recovery of the pair to the resistance area of 1.1618.
Before talking about the 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 for October 12 revealed an increase in both short and long positions, but there were more of the former, which slightly reduced the negative delta. Political problems in the United States of America have been resolved, and the latest fundamental reports continue to delight traders, which testifies to the continued good pace of the American economic recovery. The fact that the Federal Reserve is already seriously considering scrapping the bond buying program is no longer news that could help dollar bulls at the moment. But the fact that representatives of the European Central Bank began to express concern about the rate of inflation, albeit not in the same form as their colleagues from the Fed - all this allows the European currency to begin to gradually win back its positions. This trend may continue in the future, especially in the case of strong statistics on the European economy. However, the larger medium-term demand for risky assets will remain limited due to the wait-and-see attitude of the ECB. The COT report indicated that long non-commercial positions rose from 196,819 to 202,512, while short non-commercial positions jumped from 219,153 to 220,910. By the end of the week, the total non-commercial net position rose slightly to -18 398 against -22,334. The weekly closing price dropped to 1.1553 against 1.1616.
The euro has risen sharply during the Asian session and is aimed at renewing new monthly highs. Speeches by representatives of the ECB, namely: Frank Elderson and ECB executive board member Fabio Panetta, may lead to more active long positions of the euro in the morning. The initial target of the bulls is a breakthrough of the level 1.1657, which they came close to after the Asian rally. Only a breakthrough and test of this area from top to bottom forms a new signal to open long positions in hopes of further growth of the pair and the continuation of the upward trend to the 1.1684 area. A breakthrough of this range with a similar consolidation forms an additional entry point to buy, which will lead EUR/USD to new local levels: 1.1713 and 1.1742, where I recommend taking profits. A better option for buying would be a downward correction in the first half of the day to the support area at 1.1637. Forming a false breakout there will be an excellent signal to open long positions during the morning growth. I advise you to buy EUR/USD immediately on a rebound only after the first test of the 1.1618 low, or even lower - from the level of 1.1593, counting on an upward rebound of 15-20 points within the day.
To open short positions on EUR/USD, you need:
After yesterday's unsuccessful reversal of the bullish trend, bears are no longer in a hurry to return to the market. The absence of fundamental reports on the eurozone today may further worsen their situation. The original goal is to protect the resistance at 1.1657. Forming a false breakout there will be the first signal to open short positions, which will give an excellent point to the market with the goal of pulling the pair down to the intermediate support of 1.1637. A breakthrough and a test of this area from the bottom up will increase the pressure on the pair and open the way to the lows: 1.1618 and 1.1593, where the moving averages, playing on the side of the bulls, pass. I recommend taking profits on short positions there. In case the euro grows further during the European session and the bears are not active around 1.1657, I advise you to postpone shorts until the next resistance test at 1.1684. But even there, it is best to open short positions after the formation of a false breakout. The best option for selling EUR/USD immediately on a rebound will be new highs in the area of 1.1713 and 1.1742, and then, counting on a downward correction of 15-20 points.
I recommend that you familiarize yourself with:
GBP/USD: plan for the European session on October 19. COT reports. Pound bulls have defended 1.3717 and are aiming for new weekly highs
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates a continuation of the upward trend in the euro.
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
In case of a decline, the indicator's average border in the area of 1.1618 will act as a support.
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.
