To open long positions on EUR/USD, you need:
Yesterday, euro bulls were quite stubborn and actively defended their positions after reaching another high. Let's take a look at the 5 minute chart and break down the trades that formed yesterday. I paid attention to the 1.2243 level in my forecast and advised you to make a decision on entering the market from it. In the first half of the day, it broke through with a higher consolidation, and the reverse test from top to bottom created a good signal to open long positions in the euro. A similar signal was formed in the second half of the day, after the bears failed to take control of 1.2243. However, the pair did not go up more than 20 points. In today's Asian session, the bulls also managed to once again protect the support at 1.2243, and therefore, the technical picture had to be revised.
Considering that important fundamental reports will not be released today, it is likely that trading will mainly be carried out in a horizontal channel, which will limit the upward potential of the pair. Therefore, be very careful when buying the euro at the current highs. Euro bulls will clearly aim to surpass the next resistance at 1.2272. Only a breakthrough and test of this area from top to bottom can create a new entry point into long positions (by analogy with the long position, which I discussed above) in continuation of the upward trend and in hopes that it could reach a new monthly high like 1.2313, where I recommend taking profit. The next target will be the area of 1.23474, but it will not be so easy to reach this level, especially considering that only the speeches of the Federal Reserve representatives will take place today and no important reports will be released. A more optimal scenario for long positions will be a downward correction to the support area of 1.2228, where the moving averages, playing on the side of the bulls, pass. Forming a false breakout there will be a good entry point into long positions in hopes of stopping the intraday bearish trend and recovering the pair to the resistance area of 1.2272. In case the bulls are not active in the support area of 1.2228, it is best to postpone short positions until a larger low like 1.2179 is updated, where you can buy the euro immediately on a rebound, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears will fight to regain control of the market. To do this, they need to defend the 1.2272 level, which was formed quite recently. Forming a false breakout there will create a new signal to sell the euro with the aim of falling to the support area of 1.2228. A succeeding downward correction of the pair depends on this level. Therefore, its breakthrough and a test from the bottom up creates an additional entry point for short positions in hopes of falling to the area of 1.2179, where I recommend taking profits. Moving averages pass in the support area at 1.2228, which makes this level especially important for the bears. If the bears are not active in the 1.2272 area this morning, then I recommend postponing short positions until resistance at 1.2313 has been 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 1.2347.
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 carried out above 30 and 50 moving averages, which indicates the continued growth of the euro in the short term.
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 upper border of the indicator in the area of 1.2260 will lead to a new wave of euro growth. Surpassing the lower border of the indicator in the area of 1.2230 will increase the pressure on the pair.
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.
