To open long positions on EUR/USD, you need:
Yesterday there were several signals to enter the market. Let's take a look at the 5 minute chart and see what happened. The eurozone data released in the first half of the day appealed to traders who managed to generate a signal to buy the euro. You can see how the bears are trying to break through 1.1362, but after a while the bulls very quickly regain control of this level, which generates a signal to open long positions according to the scenario that I described in detail in my forecast. The divergence, which continued to form after the renewal of yesterday's low, also benefited bulls. However, the pair did not go against the trend and the upward movement was about 15 points, after which the pressure on the euro returned. A breakthrough of the 1.1353 level in the afternoon and its reverse test from the bottom up formed an excellent entry point further along the trend, which led to a large sell-off in the euro by more than 30 points.
Statements made by representatives of the Federal Reserve on inflation in the US have strengthened the dollar's position, but today everything may change. The report on the consumer price index for the eurozone will be published in the European session, the growth of which may return the pair to strength, which will lead to an upward correction. The Eurozone Financial Stability Report can also help the bulls. All they need today is to protect the support at 1.1287. This will stop the bearish trend but will not lead to a correction. Forming a false breakout there will be the first signal to open long positions. However, for a real return to the bull market during the European session, it is necessary to get out of the resistance at 1.1324. The reverse test of 1.1324 from top to bottom after the release of data on the inflation jump in the eurozone in October this year will provide an entry point to long positions based on the growth of EUR/USD to the 1.1353 area, where the moving averages are similar, limiting the upward potential of the pair. A breakthrough of 1.1353 and a similar test from top to bottom will lead to another buy signal and growth to the 1.1386 area, where I recommend taking profits. The next target will be the area of 1.1421. If the pressure on EUR/USD persists in the first half of the day and the bulls are not active at 1.1287, it is best not to rush to buy against the trend, but wait for a false breakout to form in the 1.13257 area. It is possible to open long positions in EUR/USD immediately on a rebound from a low like 1.1222, or even lower - from 1.1193, counting on a correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears control the market, but today they can lose the initiative at any moment. As I noted above, everything can change due to the strong inflation data in the euro area and the change in rhetoric in the statements of the representatives of the European Central Bank. It is very important to find out what ECB President Christine Lagarde will talk about today after the release of the inflation report. If the ECB continues to adhere to the super soft scenario, the pressure on the euro will continue. Bears need to protect 1.1324. Forming a false breakout there creates the first signal to open short positions during the continuation of the downward trend, which will provide an excellent point with the goal of falling to the intermediate support at 1.1287. A breakdown and test of this area from the bottom up will increase the pressure on EUR/USD and lead to the demolition of a number of buy stop orders. This will open the way to new lows: 1.1257 and 1.1222. I recommend taking profits on short positions there. If the euro grows during the European session and the bears are not active around 1.1324, I advise you to postpone selling until the next resistance test at 1.1353. But even there, it is best to open short positions after the formation of a false breakout. The best option for selling EUR/USD immediately on a rebound will be a high around 1.1386. You can count on a downward correction of 15-20 points.
I recommend for review:
The Commitment of Traders (COT) report for November 9 revealed that short positions decreased and long ones slightly increased, which led to the return of a positive delta. The fact of high inflationary pressure in the US continues to support the US dollar, as many investors are counting on an earlier increase in interest rates by the Federal Reserve next year and are already winning back the market in this direction - buying the US dollar. The statements of the representatives of the central bank, which have been heard recently, only confirm the expectations of market participants. At the same time, the president of the European Central Bank, Christine Lagarde, confidently insists that the ultra-soft monetary policy will not change even next year – this puts some pressure on buyers of risky assets who were counting on a more active recovery of the euro. In the near future, we will get acquainted with important data on retail sales in the United States and the unemployment rate in the eurozone, which will shed light on further actions of central banks to stimulate the economies of their countries. The latest November COT report indicated that long non-commercial positions increased from the level of 191,496 to the level of 192,544, while short non-commercial positions decreased from the level of 197,634 to the level of 188,771. At the end of the week, the total non-commercial net position became positive and amounted to 3,773 against -6,138. The weekly closing price decreased quite slightly, to the level of 1.1587 against 1.1599.
Indicator signals:
Trading is underway below the 30 and 50 daily moving averages, which indicates a continuation of the bear 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
A breakthrough of the lower border of the indicator in the area of 1.1287 will increase pressure on the euro. In case of growth, the upper border of the indicator 1.1386 will act as resistance.
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.
