To open long positions on EUR/USD, you need:
Yesterday was a very calm day and volatility was low, as it reached around 35 points. It is unlikely that traders have found something interesting to trade in such a market. If you look at the 5-minute chart, you will see that none of the levels I indicated have been tested. Eurozone GDP data managed to keep the euro from falling after a disappointing report on industrial production in Germany in the first half of the day. As expected, traders ignored the report on the US trade budget deficit in the afternoon, which narrowed by an order of magnitude due to export growth. Most likely today will also be calm, so do not be surprised if we do not receive signals to enter the market.
Important fundamental reports will not be released during the European session. Only the German foreign trade balance report will attract attention, but it is unlikely to somehow affect the euro in order for it to go beyond the horizontal channel of 1.2155-1.2201. In case we receive disappointing results, the pressure on the euro will return, but at the same time it is unlikely to persist for a long time, and the bulls will use the moment to protect support at 1.2155. Forming a false breakout there creates a signal to open long positions, and the bulls will aim for resistance at 1.2201, beyond which it was not possible to get out of yesterday. A breakthrough and test of this area from top to bottom can create an entry point into long positions in continuation of the upward trend, counting on the next high of 1.2225. The next target will be the 1.2250 level, where I recommend taking profits. If the bulls are not active in the 1.2155 area, short positions can be safely opened from a large low in the 1.2113 area, or even lower - in the 1.2073 area, counting on an upward correction of 15-20 points within the day. If the bulls fail to get out of resistance at 1.2201, trading will continue in a new wide horizontal channel at 1.2123-1.2201.
To open short positions on EUR/USD, you need:
The bears will fight to regain control of the market, and in order to do so it is necessary to protect the large resistance at 1.2201, which, just like yesterday, the bulls are aiming for. This level also acts as the upper border of the horizontal channel. Forming a false breakout there generates a signal to sell the euro in hopes that the currency would fall to the area of the middle border of the horizontal channel at 1.2155. A breakthrough of this level will pull the pair into a downward correction, which will limit the succeeding bull market, at least temporarily. An equally important task is to settle below the 1.2155 range. A disappointing report on the euro area will not allow this, since they are not important for the foreign exchange market. A test of the 1.2155 level from the bottom up creates an additional signal to sell the euro in order to return to the lower border of the horizontal channel at 1.2113, where I recommend taking profits. The next target will be the low of 1.2073, but such a scenario is hardly possible without serious market shocks. If the bears are not active in the 1.2201 area this morning, then I recommend postponing short positions immediately to a rebound from resistance at 1.2225, or even higher - from a high of 1.2250, counting on a downward correction of 15-20 points. The next serious level is at a new local high in the area of 1.2283.
The Commitment of Traders (COT) report June 1 shows that long positions increased while short positions decreased, which indicates a growth in demand for the European currency in the last month of the second quarter of this year. The European economy is expected to show a particularly strong recovery in the summer, which will lead to new growth for the euro in the area of annual highs. Lifting a number of quarantine restrictions, which are still in effect in European countries, will lead to an even greater revival of the economy, which will provide momentum through an increase in retail sales and inflation, which, according to the latest report, has seriously increased in the eurozone. The data on activity in the manufacturing and service sectors also continue to delight economists, which again indicates a serious recovery. Any strong downward movement of the EUR/USD pair is now perceived by traders as a good opportunity to gain long positions in continuation of the bull market. The dollar can only hope that in the summer, the Federal Reserve will start to seriously talk about reducing the volume of purchases of bonds, but we will know about this only by mid-June. The COT report showed that long non-commercial positions jumped from 236,103 to 237,360, while short non-commercial positions fell from 132,103 to 128,038. This indicates an influx of new buyers that expect the euro to continue rising, while sellers have a wait-and-see attitude. Considering the fact that the pair significantly recovered last Friday, this may indicate the formation of a new upward trend and the return of EUR/USD to local highs. This is where the bulls will continue to accumulate long positions in hopes of going beyond them. This indicates a possible breakdown of last month's highs in the near future and the continued growth of the euro. The total non-commercial net position rose from 104,000 to 109,322. The weekly closing price also increased from 1.22142 to 1.22326.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the market and the lack of 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
Volatility is very low, which does not provide signals to enter the market.
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.
