To open long positions on EUR/USD, you need:
Nothing interesting happened on the market last Friday morning, but the US session was much more fun. Let's take a look at the 5 minute chart and break down the trades. Considering that I did not revise the levels, the strategy remained the same. The European currency fell below the level of 1.2205 after the speech of European Central Bank President Christine Lagarde and all that was required was its reverse test from the bottom up, which happened. As a result, a signal was generated to open short positions, which quickly pushed the euro to a low of 1.2163, where I recommended taking profits (+40 points) and opening short positions immediately on a rebound. Long positions from the level 1.2163 brought another 20 points of profit.
We can hardly count on the euro to strengthen today, especially after European Central Bank President Christine Lagarde said that Europe needs to maintain stimulus programs to support the economy. Euro bulls will most likely aim to return to the resistance of 1.2205 during the European session. Only a breakthrough and a test of this area from top to bottom can create a new entry point into long positions in continuation of the upward trend and then we can count on the renewal of the monthly high to the area of 1.2243, where I recommend taking profits. The next target will be the area of 1.2294, but it will not be so easy to get to this level, especially considering that important fundamental reports will not come out today. A more optimal scenario for long positions will be a downward correction to the support area of 1.2163. Forming a false breakout there will be a good entry point into long positions in hopes of stopping the intraday bearish trend so that the pair can recover to the resistance area of 1.2205, where the moving averages pass, limiting the upward potential. If the bulls are not active in the support area of 1.2163, it is best to refrain from short positions until a new large low in the 1.2103 area is renewed, 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 keep the market under their control. To do this, they need to defend the level of 1.2205, which was surpassed last Friday after Christine Lagarde's speech and the publication of good fundamental data on PMI indices in the United States. Forming a false breakout there, where the moving averages are, creates a new signal to sell the euro in order to fall to the support area of 1.2163. A succeeding downward correction depends on this level. Therefore, its breakthrough and test from the bottom up (by analogy with the trade that I analyzed above) creates an additional entry point to short positions, and its purpose is for the pair to fall to the level of 1.2103, where I recommend taking profits. If the bears are not active at the level of 1.2205 in the first half of the day, I recommend postponing short positions immediately to a rebound from the large resistance at 1.2243, beyond which it was not possible to surpass last Friday. You can sell the euro from there in hopes of a downward correction of 15-20 points. The next resistance is only at the new local high in the area of 1.2294.
The Commitment of Traders (COT) report for May 11 revealed that both short and long positions have increased, but this time there were more buyers, which caused the overall non-commercial position to rise. Last week, everyone was waiting for the US inflation report, which set the tone. Its sharp rise only provided temporary support to the US dollar, but traders managed to take advantage of this moment to open long positions after the EUR/USD pair corrected downward. Apparently, news that the Federal Reserve is going to raise interest rates is the only thing that can push the dollar to significantly rise. Until then can the demand for risky assets prevail, 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 206,472 to 223,387, while short non-commercial positions rose from 121,643 to 129,480. This indicates an influx of new buyers that expect the euro's growth, however with each renewal of the highs, there are more and more people willing to sell. The total non-commercial net position rose from 84,829 to 93,907. The weekly closing price also increased significantly from 1.20591 to 1.21406.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates the interception of the initiative on the part of the bears.
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 1.2220 will lead to a new wave of growth for the euro. Surpassing the lower border of the indicator in the area of 1.2160 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.
