To open long positions on EURUSD, you need:
Nothing has changed for the euro in the first half of the day. As expected, the data on inflation in the eurozone did not exceed economists' forecasts, which did not allow buyers to get beyond the resistance of 1.1728. Let's look at the 5-minute chart and talk about where it was possible to enter the market. The formation of a false breakout at the level of 1.1728 led to a good entry point into short positions in continuation of the bearish scenario that we observed yesterday. However, as it usually happens recently after major movements, a sharp decrease in volatility has not yet allowed the bears to achieve a good fall of the pair. From a technical point of view, nothing has changed. The focus of the bulls in the afternoon will shift to the minutes of the Federal Reserve System from this year's July meeting.
Given that traders are unlikely to find anything new in it, it will be extremely difficult to count on the pair's recovery. The initial task of the bulls remains to return to the control of the resistance of 1.1728, which they failed to do in the first half of the day. A test of this level from top to bottom forms a signal to buy the euro to rise to the level of 1.1745, where the moving averages are playing on the sellers' side. A break in this area can also provoke an upward correction of the pair already to the resistance 1.1769, where I recommend fixing the profits. The further task of buyers will be to update the level of 1.1799, which will be a clear signal for the formation of a new bullish trend. In the scenario of a further decline in EUR/USD in the second half of the day, a serious task for the bulls remains to protect the support of 1.1699, just below which a divergence may form on the MACD indicator, playing on the buyers' side. When a false breakdown is formed, you can open long positions. In the scenario of a decline in EUR/USD and the absence of bull activity in the area of 1.1699, I advise you to wait for the update of the minimum at 1.1673 or buy EUR/USD immediately for a rebound from the support of 1.1630, counting on an upward correction of 15-20 points within the day.
To open short positions on EURUSD, you need:
Sellers keep the market under their control, which is confirmed by the unsuccessful attempt of the bulls to take the level of 1.1728. While trading will be conducted below this range, we can count on a larger euro movement down to the minimum of 1.1699. A breakthrough and a reverse test of this area from the bottom up will increase the pressure on the pair and form an additional signal to sell the euro in the expectation of updating the already new lows: 1.1673 and 1.1630, where I recommend fixing the profits. We can also expect a fall in the euro if traders find something new in the Federal Reserve System's minutes indicating that the asset purchase program will be curtailed in the short term, which is unlikely. A more distant target will be the area of 1.1604. In the case of a repeated upward correction of the euro, only the formation of a false breakdown at the level of 1.1728 forms a signal to open short positions in the expectation of a return of the bear market. Under the scenario of EUR/USD growth during the US session and the absence of bull activity at the level of 1.1728, it is best to postpone sales until the test of a larger resistance of 1.1745. It is also possible to open short positions only after the formation of a false breakdown. I advise you to sell the pair immediately for a rebound based on a downward correction of 15-20 points only from the maximum of 1.1769.
The COT report (Commitment of Traders) for August 10 showed a clear increase in traders' interest in the market, as both long and short positions increased. However, the latter turned out to be more, which led to a reduction in the positive delta. Last week, many traders focused on the consumer price index of the United States of America, which slowed down after record growth rates and coincided with economists' forecasts. It seriously affected the desire of traders to buy the US dollar in the expectation of imminent changes in the bank's monetary policy. Given such inflationary jumps, we can expect that the Federal Reserve System will slow down with changes in the bond purchase program, which many investors were counting on in September of this year. Accordingly, this will weaken the position of the US dollar. But do not think that against this background, the euro will go up sharply. The lack of guidance due to the new strain of Delta coronavirus and the incomprehensible reaction of the European economy will force the European Central Bank to continue to adhere to a wait-and-see position and maintain a stimulating policy at current levels that negatively affect the European currency. Therefore, the only thing left to do is to look at small spikes of volatility within the day – at least this market state will be until the autumn of this year. The COT report indicates that long non-commercial positions increased from the level of 199,067 to 212,809, while short non-commercial positions jumped from the level of 161,060 to the level of 178,952. At the end of the week, the total non-commercial net position decreased from the level of 38,007 to the level of 33,857. The weekly closing price also fell from 1.1874 to 1.1736.
Signals of indicators:
Moving averages
Trading is conducted below 30 and 50 daily moving averages, which indicates the bearish nature of the market in the short term.
Note: The author considers the period and prices of moving averages on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
A breakthrough of the upper limit of the indicator in the area of 1.1725 will lead to a new wave of euro growth. A break of the lower limit of the indicator in the area of 1.1705 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. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet specific 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 the short and long positions of non-commercial traders.
