To open long positions on EUR/USD, you need:
Intraday volatility of 30 points is not the best time to trade. Despite the strong fundamental statistics, which could be observed yesterday in the afternoon, the situation has not changed in any way, and we did not wait for the expected surge in the EUR/USD pair. As a result, none of the levels were updated, there were also no signals for entering the market. The data on US GDP coincided with the forecasts of economists, and the improvements in the US labor market only contributed to a slight strengthening of the US dollar within the horizontal channel, in which the pair continues to be at the time of writing.
It is unlikely that the bulls will be able to reverse the downward trend today, which we have observed since May 25. Much will depend on the reports on the French economy that are set to be released in the first half of the day, as well as what the indicator of consumer confidence in the eurozone will be. If the reports exceed the forecasts of economists for the better, it is quite possible that the euro will strengthen, if not, then hopes that the pair will recover could completely dry up, as the bulls need a good reason to continue pushing the euro upwards. Euro bulls will most likely aim to return resistance at 1.2219 during the European session, which they did not reach yesterday. Only a breakthrough and test of this area from top to bottom can create a new entry point into long positions in continuation of the upward trend and only then can we count on the renewal of the monthly high to the 1.2261 area, where I recommend taking profits. The next target will be the area of 1.2313, but it will not be so easy to reach this level. As I noted above, the reckoning will be on good data for the eurozone. A more optimal scenario for buying will be a downward correction to the support area of 1.2179, around which we moved yesterday, but could not test. Forming a false breakout there will be a good entry point into long positions in hopes of stopping the bearish trend, which has been observed since May 25, and so that the pair could recover to the resistance area of 1.2219. The 1.2179 level also acts as a kind of lower border of the horizontal channel, in which the pair is now locked. The upper border of the channel coincides with the high of 1.2261. In case the bulls are not active in the support area of 1.2179, it is best to postpone short positions until a new large low in the area of 1.2126 is renewed, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
Bears will continue to fight for the pair's downward trend. To do this, they need to fall below the level of 1.2179. Most likely, another test of this area, which may take place in the near future, will lead to a breakthrough of the range, and a reverse test from the bottom up will create a good signal to open new short positions in continuation of the downward trend. Disappointing reports on French GDP and consumer confidence indicator may play on the side of the bears, and their immediate target will be the area of 1.2126, where I recommend taking profit. The next target is support at 1.2075. If EUR/USD grows in the first half of the day and volatility remains low after the reports are published, forming a false breakout in the area of 1.2219 will generate a new signal to sell the euro, counting on a decline to the lower border of the horizontal channel and its breakthrough. If the bears are not active in the 1.2219 area this morning, I recommend postponing short positions until the resistance of 1.2261 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 is only at a new local high around 1.2313.
The Commitment of Traders (COT) report for May 18 revealed that both short and long positions increased, but this time there were more bulls, which caused overall non-commercial positions to rise. Last week, everyone was waiting for economic indicators for the eurozone, namely data on inflation and GDP growth rates. The reports were in line with economists' forecasts, which made it possible for the euro to at least maintain the pair's upward potential. The release of the minutes of the Federal Reserve meeting pushed risky assets to fall, as there were ghostly hints among the committee members about the curtailment of the bond purchase program. However, the next day the entire fall was won back. By the end of the week, the pressure on the euro returned after European Central Bank President Christine Lagarde said that it was not time to roll back stimulus support in the eurozone. The data released over the past week did not worry traders much, since all the attention is now focused on the monetary policy of central banks. Apparently, only the news that the Fed is seriously going to reduce the volume of purchases of bonds can lead to a serious growth of the US dollar. Until then, with each decline from the pair, the demand for risky assets will return, which will help the euro in the short term and further renew its monthly highs. The COT report indicated that long non-commercial positions jumped from 223,387 to 232,330, while short non-commercial positions rose from 129,480 to 132,472. This indicates an influx of new buyers in hopes that the euro will continue to rise, however with each renewal of the high, there are more and more people willing to sell. The total non-commercial net position rose from 93,907 to 99,858. The weekly close also increased from 1.21406 to 1.21564.
Indicator signals:
Trading is under way below 30 and 50 moving averages, which indicates an attempt by the bears to build a new downward wave.
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 1.2179 will increase the pressure on the pair. A breakthrough of the upper border of the indicator in the area of 1.2210 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.
