To open long positions on EUR/USD, you need:
Yesterday was not the most convenient day for trading. In the first half of the day, after good data on industrial production was released, it was possible to observe how the bulls tried to regain control over the market. But none of this worked. Let's take a look at the 5 minute chart and break down the entry points.
The results of the industrial production in the euro area were surprising and it turned out to be even better than the forecasts of economists, which gave confidence to the bulls in the first half of the day, allowing them to return the pair to the resistance area of 1.2126. Unfortunately, none of the levels I indicated have been tested. Accordingly, there were no signals to enter the market. The bulls tried and failed to settle above the 1.2126 level during the US session, which resulted in forming a false breakout and creating a signal to open short positions. It never came to a major decline for the pair.
Before talking about further prospects for the EUR/USD movement, let's see what happened in the futures market and how the Commitment of Traders positions have changed. The Commitment of Traders (COT) report June 8 shows that both long and short positions decreased. This indicated profit taking and traders leaving the market ahead of the European Central Bank's important meeting, following which there were no changes in monetary policy. Many were worried about what would become of the bond purchase program, but it remained unchanged, which did not allow the bulls to maintain control of the market. The pair is now at risk of significantly adjusting its positions ahead of an important Federal Reserve meeting, the results of which will set the market's direction for the next few weeks. The dollar can only hope that this summer the Fed will start talking in all seriousness about reducing the volume of bond purchases. If this does not happen, risk appetite will increase and we will see a recovery in the euro. The COT report indicated that long non-commercial positions declined from 237,360 to 232,103, while short non-commercial positions also dropped from 128,038 to 124,890. The more the European currency falls, the more interest it will attract, since the eurozone economy will demonstrate excellent growth rates in the summer, which will certainly affect the prospects for its recovery after the coronavirus pandemic. The total non-commercial net position declined from 109,322 to 107,213. The weekly closing price also declined from 1.22326 to 1.21907.
Low volatility in the afternoon did little to delight traders, as it was completely impossible to trade. The resulting entry points were not implemented for this very reason. Today the situation promises to be completely different. Quite a few important reports were published in the course of the European session: data on inflation in the eurozone countries can awaken traders' appetite for risk, and it will all end with a report on the eurozone foreign trade balance and changes in the volume of retail trade in the United States, which will set the direction of EUR/USD to afternoon. In case we receive good inflation figures, the bulls will take advantage of this moment to protect support at 1.2096. Forming a false breakout there creates a signal to open long positions, and the bulls will aim for resistance at 1.2132, beyond which it was not possible to get out of yesterday. A breakthrough and test of this area from top to bottom on the volume can create a point of entry into long positions in continuation of the upward correction and compensation of the fall that we saw last week from the level of 1.2160. A breakthrough in this area will also open a direct path to the larger high of 1.2190, where I recommend taking profits. Under the scenario of weak data for the eurozone and the bulls are not active around 1.2096, short positions can be easily opened from a large low in the area of 1.2063, or even lower - around 1.2025, 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 regain control of the market, and in order to do so it is necessary to protect intermediate resistance at 1.2132, which the bulls are currently aiming for. Forming a false breakout there, along with weak data on inflation in Germany and France, as well as the balance of foreign trade in the eurozone, can create a signal to sell the euro in order to pull it down to the lower border of the horizontal channel at 1.2096, which will be the main focus. A breakthrough of this level and a test of it from the bottom up will pull the pair into the downward trend that was formed at the end of last week, which will then open the way for the to the low of 1.2063. The next target will be the area of 1.2025, where I recommend taking profits. However, this scenario will only be realized if we receive a strong report on the US economy. If the bears are not active around 1.2132 this morning, then I recommend postponing short positions immediately to a rebound from resistance at 1.2160, or even higher - from a high like 1.2190, counting on a downward correction of 15-20 points. The next serious level is at the new local high at 1.2222.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates market uncertainty with the pair's further 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 1.2132 will lead to a new wave of growth for the euro.
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.
