To open long positions on EUR/USD, you need:
Traders were disappointed by the US labor market report, as it turned out to be worse than analysts' forecasts, even despite the decline in the overall unemployment rate. Where and how it was possible to develop on this volatility, let's figure it out.
In the first half of the day, I paid attention to the support at 1.2105 and recommended making decisions on entering the market from it. Let's take a look at the 5 minute chart and break down the entry points. The bears made an unsuccessful attempt to settle below this range, which resulted in forming a signal to open long positions. However, the pair did not rapidly grow from the level by around 10 points. Then, immediately before the data on the US labor market was published, another false breakout was formed in the area of 1.2105, and after the report was released, the pair jumped.
Short positions immediately on the rebound from the level of 1.2157, which I drew attention to in my afternoon forecast, worked well, bringing the expected 15 points of profit, but the euro continued to rise. In the middle of the US session, attention was on resistance at 1.2183, from which it was also possible to sell the pair immediately on a rebound, which brought around 20 points of profit.
The bulls' task is to protect support at 1.2154, to which the pair is now gradually sliding down. Forming a false breakout there in the first half of the day will help preserve the bull market that we saw at the end of last week, which will lead to an upward correction to the resistance area of 1.2184, above which it was not possible to break through. Good data on the volume of orders in the German industry may implement a bullish scenario, but only a breakthrough and consolidation in this range with a test from top to bottom can create an additional entry point to long positions, which will open a direct road to resistance at 1.2213, where I recommend taking profits. The lack of activity in the area of 1.2154, below which the moving averages are, playing on the side of the bulls, may push the euro to fall. In this case, it is best to postpone long positions to the level of 1.2128, from which you can buy the pair immediately on a rebound, counting on a small rebound of 10-15 points within the day against the trend. The next major support is seen at 1.2105.
To open short positions on EUR/USD, you need:
The bears will struggle to retrace the downward trend they formed last week. The initial challenge is to protect resistance at 1.2184. 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 Germany may return the bears to the market, which can push EUR/USD to fall to the support area of 1.2154, which is now the focus. A breakthrough and a test of this range from the bottom up creates an entry point into short positions with the expectation of an exit to the 1.2128 low, where I recommend taking profits. The next target will be the 1.2105 area. If the bears are not active in the area of 1.2184, I recommend postponing short positions until an update of resistance at 1.2213, where you can sell EUR/USD 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 1.2249.
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 above 30 and 50 moving averages, which indicates an attempt by bulls to bring the market back to their side.
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
In case of growth, the upper border of the indicator in the area of 1.2200 will act as a resistance. The pair may be supported by the lower border of the indicator in the area of 1.2110.
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.
