To open long positions on EUR/USD, you need:
Several good signals for trading EUR/USD were formed yesterday, however, from a technical point of view, they did not lead to serious changes in the market picture. Let's take a look at the 5 minute chart and talk about what happened.
In the first half of the day, the bulls manage to form false breakouts in the support area of 1.1842, which leads to forming excellent entry points into long positions. Immediately after that, against the background of good fundamental reports on the eurozone, the single currency grows to the resistance area of 1.1883, which brings around 40 points of profit. Failure to settle above 1.1883 and strong data on the US economy form a false breakout in this range, which causes the euro to fall back to the 1.1842 support area at the end of the day.
We are waiting for a very important report on the change in the number of employed in the non-agricultural sector of the United States, which may lead to strengthening the US dollar. But this report will be published in the afternoon. We are waiting for European Central Bank President Christine Lagarde's speech during the European session, as well as data on the producer price index of the eurozone, which are unlikely to seriously affect the euro's direction, but may support the pair in the short term. If Lagarde takes a wait-and-see attitude, then it is better not to count on a large increase in the euro. Therefore, the bulls' initial task remains to protect the support at 1.1839. 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 breakthrough of this level, however, I recommend opening long positions in continuation of the euro's growth only after it has been tested 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 profits. The next target will be the 1.1974 area. In case the bulls are not active around 1.1839 and we receive inconclusive data on inflation in the eurozone, it is best not to rush into long positions. I advise you to wait for the 1.1805 support update. It is also possible to buy EUR/USD immediately on a rebound from a new monthly low in the area of 1.1769, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
Bears are in full control of the market, having proved their presence in the resistance area of 1.1883 yesterday. However, at the moment, their top priority for the first half of the day is to surpass support at 1.1839. There are a lot of long positions below, so weak data on inflation in the eurozone and another speech from Lagarde may negatively affect the prospects for the EUR/USD pair. A breakthrough and 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 it would further fall to a low of 1.1805, where I recommend taking profits. Further support will be the area of 1.1769. If the euro grows in the first half of the day, an equally important task for the bears is to protect the resistance at 1.1883. Forming a false breakout there (according to the analogy with yesterday) creates an entry point for short positions. If the bears are not active there, it is best to postpone selling 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 the bearish nature of the 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 1.1825 will increase pressure on the euro. A breakthrough of the upper border of the indicator around 1.1880 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.
