To open long positions on EUR/USD, you need:
Yesterday, euro bulls defended support at 1.2220 with all their might and tried to keep bears out of this level, hoping to maintain the upward trend. Let's take a look at the 5 minute chart and break down all the entry points.
It is clearly seen how the bears tried and failed to settle below the 1.2220 range during the European session, which resulted in creating signals to open long positions. The largest upward movement was around 20 points, after which the price returned to the range above. Good reports on activity in the manufacturing sector of the eurozone countries and inflation made it possible for the bulls to hold this level until the release of important fundamental reports on the US. Forming the next false breakout at this level during the US session created a signal to open long positions, after which a larger upward movement of the pair took place already by 35 points up, but we did not reach the target value.
The fact that the bulls failed to rise above a fairly important resistance speaks for itself. Trading has already returned to the area under the large resistance of 1.2249, which is the upper limit of a wide horizontal channel, from which the euro has not been able to get out since May 19 of this year. Apparently, a significant downward correction is necessary to continue the growth. A report on the producer price index of the eurozone will be published this morning and the member of the executive council of the ECB Frank Elderson will speak. It is unlikely that these events will be able to provide the expected support for the euro, so be careful with long positions. In case of weak indicators, the pressure on the euro will increase, and the bulls will have to defend support at 1.2213. Forming a false breakout there generates a signal to open long positions in continuation of the bull market, but the main goal is to regain control over resistance at 1.2249, which was formed yesterday morning. A breakthrough and test of this area from top to bottom can create a new entry point into long positions in continuation of the upward trend and counting on the renewal of the monthly high of 1.2283, where I recommend taking profits. The next target will be the area of 1.2313, but it will not be so easy to reach this level. In case the bulls are not active in the support area of 1.2213, it is best to postpone long positions until a new large low like 1.2182 is renewed, counting on an upward correction of 15-20 points within the day. The next major support is only seen around 1.2135.
To open short positions on EUR/USD, you need:
The bears will struggle to continue the downward correction they formed yesterday afternoon. Taking into account that a large level like 1.2220 was "smeared", the intermediate support has slightly changed and is now seen in the area of 1.2213, which the bears will focus on today. A test of this area, which may take place in the near future after the data on the eurozone countries, can cause the pair to go beyond the range, and a reverse test from the bottom up can create a good signal to open new short positions in continuation of the downward trend. A disappointing report on inflation in the euro area may put more pressure on the euro, which will be a signal for a bearish scenario. In this case, the bears' closest target will be the 1.2182 area, where I recommend taking profits. Support at 1.2134 is still a target. If EUR/USD grows in the first half of the day, forming a false breakout in the area of 1.2249 will generate a new signal to sell the euro, hoping that the pair will fall further. If the bears are not active in this range, then I recommend postponing short positions until the resistance of 1.2283 is updated, where you can open short positions immediately on a rebound, counting on a downward correction of 15-20 points within the day. The next major resistance is only at a new local high around 1.2313.
The Commitment of Traders (COT) report for May 25 revealed that long positions increased while short ones decreased, which indicates a growth in demand for the European currency before the start of the last month of the second quarter of this year. It is expected that the European economy will show particularly strong growth in the summer, which will lead to a new growth for the euro in the area of annual highs. Data on the growth rate of the US economy in the first quarter of 2021 did not particularly surprise traders last week, which caused the dollar to remain under pressure. Any strong movements of the EUR/USD pair are now perceived by traders as a good opportunity to gain long positions in continuation of the bull market. Apparently, only the news that the Federal Reserve is seriously going to reduce the volume of bond purchases can lead to a serious increase in the US dollar, but we will know about this only by mid-June. Up to this point, every time the pair declines, the demand for risky assets will return. The COT report shows that long non-commercial positions jumped from 232,330 to 236,103, while short non-commercial positions fell from 132,472 to 132,103. This indicates an influx of new buyers in hopes of continued growth of the euro, and a wait-and-see attitude on the bears' part. The bulls accumulate long positions given the fact that the pair has been standing at local highs for quite a long time, but the bears are gradually getting rid of the euro. This indicates a possible breakdown of monthly highs in the near future and the continuation of the euro's growth. The total non-commercial net position increased from 99,858 to 104,000. The weekly closing price also increased from 1.21564 to 1.22142.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates some uncertainty with the future direction 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 upper border of the indicator in the area of 1.2245 will lead to a new wave of growth for the euro. Surpassing the lower border in the area of 1.2205 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.
