To open long positions on EUR/USD, you need:
Yesterday, the euro bulls managed to compensate for all the decline that occurred after the US inflation report was published. Let's take a look at the 5 minute chart and talk about what happened. We see how the bulls are trying to update the level of 1.1799, but it is impossible to get out of this range. Weak fundamental data on the eurozone and a decline in industrial production weighed on the euro. But the bears' efforts did not allow them to reach the support of 1.1773, after which the pair returned and settled above the resistance of 1.1799. Testing it from top to bottom created an entry point into long positions in continuation of the upward trend. As a result, the upward movement was about 25 points and the market stopped at the next resistance area at 1.1824.
Just as the bears did not try to defend this level in the afternoon, a good downward movement did not take place even after forming a sufficiently large number of false breakouts on it, and after the speech of Federal Reserve Chairman Jerome Powell, the bulls managed to rise above this range, however, I did not see an accentuated upward movement there.
Today we do not have important fundamental statistics for the eurozone, except for the report on the consumer price index in Italy, which most likely will not affect the euro in any way. Therefore, in the first half of the day, the focus will be on 1.1838, which the bulls have been aiming for since yesterday. Only a breakthrough and consolidation on this range, followed by its test from top to bottom, can create a signal to open long positions with the expectation of an increase to the high of 1.1863. The next target will be the resistance at 1.1893, 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 of 1.1809, on which the fragile upward movement of the euro, which we saw yesterday, depends on. Forming a false breakout there generates a signal to open long positions in order to continue the upward correction. There are also moving averages, which are already playing on the side of the bulls. In case the bulls are not active in the 1.1809 area, I advise you to postpone long positions and wait for the update of this week's low in the 1.1777 area, from where you can buy EUR/USD 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 have lost control of the market and it looks like there is balance now. Considering that there are no important fundamental reports in the first half of the day, most likely the whole struggle will unfold around the level of 1.1838. Forming a false breakout on it generates a signal to open short positions in hopes of maintaining the bearish mood that was observed at the beginning of this week. In this case, the target will be support at 1.1809, where the moving averages pass. Consolidating below this range and a test of this area from the bottom up can create a good signal to open another short position while expecting that the pair would fall to a low like 1.1777. The next target will be the area of 1.1740, where I recommend taking profits. If EUR/USD grows during the European session and the bulls are not active at the level of 1.1838, then it is best to postpone short positions until the test of the larger resistance at 1.1863 or to the level of 1.1893, 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 just above the 30 and 50 moving averages, which indicates the bulls' attempt to regain control 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
In case of growth, the upper border of the indicator in the area of 1.1850 will act as a resistance. The lower border of the indicator around 1.1800 will act as a support.
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
