To open long positions on EUR/USD, you need:
Last Friday, despite the rather serious fundamental report on the US economy, the day was rather dull. Against the background of low market volatility, there was only one signal to buy the euro both in the first and second half of the day. Let's take a look at a 5 minute chart. It can be seen that after the US retail sales report was published, which turned out to be much better than the forecasts of economists, EUR/USD bears tried to go to the area below the support of 1.1797, but this only resulted in forming a false breakout and a signal to buy the euro. After moving up 15 points, the upward trend ended quickly.
There is nothing interesting about today's European session that would attract the attention of traders. It is unlikely that the monthly report of the Bundesbank will be able to influence the market and squeeze the pair out of the horizontal channel at 1.1797-1.1822. Most likely, volatility and trading volume will remain at a fairly low level at the beginning of the week. The bulls will focus on the level of 1.1822 in the first half of the day. Only a breakthrough and consolidation in this range, followed by its downward test, will generate a signal to open long positions in hopes that the quote would rise to the 1.1849 high. The next target will be the resistance at 1.1874, where I recommend taking profits. In case EUR/USD falls during the European session, the bulls need to try very hard to protect the support 1.1797, from which a false breakout was formed last Friday. Further growth depends on this level. Forming a false breakout there will help protect the lower border of the short-term upward channel and generate a signal to open long positions in order to restore the euro to the 1.1822 area. In case the bulls are not active in the 1.1797 area, I advise you to postpone long positions and wait for last week's low to be updated in the 1.1773 area, from where you can buy EUR/USD immediately on a rebound, counting on an upward correction of 15-20 points within the day. The next major support is seen around 1.1740.
To open short positions on EUR/USD, you need:
Most likely today the bears will still try to regain control over the market, however, this will not be easy since important fundamental reports will not be released today. All of today's struggle will unfold around the level 1.1822. Forming a false breakout on it generates a signal to open short positions while expecting the bearish trend that formed in the middle of last week to continue. An equally important target will be the support at 1.1797, since its breakdown will determine whether the bulls are still in control of the pair or not. Consolidating below this range and testing it from the bottom up can create a good signal to open short positions while expecting the pair to fall to a low like 1.1773. The next target will be the area of 1.1740, where I recommend taking profits. In case EUR/USD grows during the European session and the bulls are not active at the level of 1.1822, it is best to postpone shorts until the test of the larger resistance at 1.1849 or to the level of 1.1874, where you can immediately sell the pair on a rebound, counting on a downward correction of 15-20 points...
We could observe a reduction in the overall positive net position in the Commitment of Traders (COT) report for July 6, and this was due to the sharp rise in short positions. This balance of power does not take into account the growth that was observed at the end of last week after the ECB raised its inflation target to 2.0% and admitted that it will allow inflation to exceed the target for quite some time in the future. This turned out to be enough for the bulls to start building up long positions. Now the focus will be on the ECB meeting, which will be held on July 22, and at which changes in monetary policy will be announced. Until then, any decline in the European currency will be seen as a good reason to build up long positions. The COT report indicated that long non-commercial positions rose from 209,058 to 212,998, while short non-commercial positions rose from 121,912 to 135,808. No important fundamental reports for the euro area this week, so the focus will shift to US inflation and retail sales. Further direction depends on these indicators. But whatever they are, the key to the growth of the European currency is the economic recovery in the summer, so I recommend betting on the growth of risky assets. The total non-commercial net position declined from 87,146 to 77,190. The weekly closing price dropped from 1.1928 to 1.1862.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates some market uncertainty with the pair's short-term direction.
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
A breakthrough of the upper border of the indicator in the area of 1.1820 will lead to a new wave of euro growth. A breakdown of the lower border of the indicator in the area of 1.1795 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.
