To open long positions on EURUSD, you need:
In the first half of the day, everything went exactly according to the scenario, as throughout the week: a sharp breakout of local lows, a pause, updating levels, and further downward movement. Let's look at the 5-minute chart and figure out where it was possible and necessary to enter the market. An instant breakout of the 1.1671 support with a reverse test of this level led to the formation of a good signal to open short positions in the continuation of the fall of the European currency in the afternoon. Given that the eurozone consumer confidence indicator did not please traders, there is not much for buyers to count on yet. It is better to bet on a further decline in EUR/USD.
In the afternoon, as we are already used to, all the emphasis will be placed on the speeches of representatives of the US Federal Reserve System and the statements made by Jerome Powell. Also, do not forget about the speech of the President of the European Central Bank, Christine Lagarde. She recently supported soft monetary inflation, which goes against common sense, especially against the background of a sharp recovery in the eurozone economy and a major inflationary jump expected this fall. Euro buyers today have failed to offer anything in the next weekly low of 1.1671, which now acts as a kind of resistance. They need to cling to this level during the American session, just above which the moving averages are playing on the sellers' side. Only a breakout and a test of 1.1671 from top to bottom will lead to the demolition of the bears' stop orders, which forms a good entry point into long positions, counting on the pair's recovery to the area of 1.1699 and then to a larger resistance of 1.1724, where I recommend fixing the profits. A longer-range target will be a maximum of 1.1747. If the pressure on the euro continues in the second half of the day, the primary task of the bulls will be to protect the level of 1.1651. Only the formation of a false breakdown will lead to the formation of a signal to open long positions based on an upward correction. In the scenario of the absence of bull activity at this level, I advise you to postpone purchases to new lows in the area of 1.1631 and 1.1605. It is possible to immediately open long positions for a rebound at the new local support of 1.1541, counting on an upward correction of 15-20 points within the day.
To open short positions on EURUSD, you need:
If Lagarde continues to tell the markets that inflation does not pose a threat and the eurozone economy needs additional incentives, we will see another drop in EUR/USD. Sellers already have the market under their control, which leads to the preservation of the bearish trend. The test and the breakthrough of the 1.1651 level, as well as its update from the bottom up, will form a new entry point into short positions to reduce EUR/USD to new intraday lows of 1.1631 and 1.1605, where I recommend fixing the profits. A more distant goal will be the minimum of 1.15441. However, we will be able to get to it only if the Fed today seriously talks about a more active pace of curtailing soft monetary policy. In case of EUR/USD growth in the afternoon after the speech of the chairman of the Federal Reserve System, the bears will need a lot of effort to protect the resistance of 1.1671, which was formed following the results of the European session. Only the formation of a false breakdown on it forms a good entry point into short positions. In the scenario of no sellers at the level of 1.1671, it is best to postpone sales until the test of a larger resistance of 1.1699. I advise you to open short positions immediately for a rebound based on a downward correction of 15-20 points only from the new maximum of 1.1724.
The COT report (Commitment of Traders) for September 21 recorded a sharp increase in short positions and only a slight increase in long ones due to the lack of desire among traders to bet on strengthening risky assets at the beginning of autumn this year. The prospect of changes in the monetary policy of the Federal Reserve System in November this year keeps the demand for the US dollar, as many investors expect the start of the reduction of the bond purchase program by the central bank. The fact that inflation in the United States of America is almost out of the control of the Fed suggests possible more aggressive actions by the end of the year, which could seriously affect the mood of traders and investors. This week, there will be many speeches by both representatives of the Fed and Chairman Jerome Powell, which can shed light on how the central bank will act in a given situation. Given that energy prices continue to fly up, which will necessarily affect the producer and consumer price index, specifics from the Federal Reserve System certainly would not hurt the markets. Demand for risky assets will remain limited due to the high probability of another wave of coronavirus spread and its new Delta strain. All this will force the European Central Bank to continue to adhere to a wait-and-see position and maintain a stimulating policy at current levels since there are no serious inflationary problems in the eurozone yet. The COT report indicates that long non-commercial positions have grown quite a bit - from the level of 186,554 to the level of 189,406, while short non-commercial positions have jumped quite seriously - from the level of 158,749 to the level of 177,311. At the end of the week, the total non-commercial net position dropped from the level of 27,805 to the level of 12,095. The weekly closing price also fell to 1.1726 from 1.1809.
Signals of indicators:
Moving averages
Trading is below 30 and 50 daily moving averages, which indicates a bear market.
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
In the case of growth, the upper limit of the indicator around 1.1699 will act as resistance.
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.
