To open long positions on EURUSD, you need:
In the first half of the day, several signals were formed to enter the market. Let's look at the 5-minute chart and figure out the entry points. At the very beginning of the European session, the bears managed to protect the resistance of 1.1326, forming a false breakdown there, which led to a signal to sell the euro. However, there was no major downward movement, and after the pair fell by 12 points, the demand for risky assets returned. A repeated test and a breakthrough of 1.1326 and then a return to this level from top to bottom led to the formation of a signal to buy the euro, which resulted in a powerful increase of almost 50 points to the next resistance of 1.1371. At this level, the bears are now trying to stop the bull market.
As I noted in the morning forecast, the growth of the euro is likely to continue if inflation exceeds the forecasts of economists, which happened. The annual consumer price index of the eurozone in November was 4.9%, against 4.1% in October. Strong inflation is another reason and headache for the European Central Bank, which did not expect such a scenario at the end of this year. All this helps to push the euro up in anticipation of changes in the central bank's policy. The most optimal scenario for buying the euro in the current conditions will be a downward correction to the support of 1.1326, the breakdown of which took place today in the morning. The formation of a false breakdown in this range will lead to the formation of a new entry point into the market, counting on the continuation of the upward correction of the pair, which may develop into a new bullish trend. However, at the time of writing, trading is conducted around 1.1371 – therefore, a breakthrough of this resistance will be no less interesting for the bulls. The 1.1371 test from top to bottom, together with weak data on the US consumer confidence indicator, forms an additional entry point into long positions, followed by the pair's recovery to the high of 1.1417. A more distant target will be the resistance of 1.1462, where I recommend fixing the profits. In the scenario of a decline in EUR/USD to 1.1326 and the absence of bull activity, it is best not to rush with purchases. I advise you to wait for the fall of the pair and the formation of a false breakdown at the minimum of 1.1278, where the moving averages are playing on the side of the bulls. You can open long positions on EUR/USD immediately for a rebound from 1.1231, or even lower - from 1.1188, counting on a correction of 15-20 points within a day.
To open short positions on EURUSD, you need:
The bears tried but failed to cope with the task assigned to them. Now they need to think about how to defend the resistance of 1.1371, where the bulls took a break after the rally in the morning. Euro sellers will be able to count on data on the consumer confidence indicator in the United States, which should be much better than economists' forecasts, as well as on speeches by Chairman of the Fed Board of Governors Jerome Powell and Finance Minister Janet Yellen. Only the protection of the 1.1371 resistance after the release of the above report and the formation of a false breakdown there will lead to an excellent entry point into short positions. The speech of the Chairman of the Federal Reserve System and his hawkish statements regarding monetary policy will very quickly return sellers to the market who expect the pair to fall to the support of 1.1326. A very important task for sellers is to regain control over this level. Its breakdown and test from the bottom up will lead to the formation of a signal to open short positions with the prospect of a decline to the area of 1.1278. A more distant goal will be the support of 1.1231, where I recommend fixing the profits. If the euro rises and bears are inactive at 1.1371, it is better to wait for sales. The optimal scenario will be short positions when forming a false breakdown in the area of 1.1417. It is possible to open short positions immediately for a rebound from the highs: 1.1462 and 1.1514 with the aim of a downward correction of 15-20 points.
The COT report (Commitment of Traders) for November 23 recorded an increase in both short and long positions. However, there are still more of the former, which led to an increase in the negative delta. Data on manufacturing activity in the eurozone countries provided significant support to the euro last week, but pressure on risky assets remained. A strong report on US GDP and the minutes of the Federal Reserve System from its last meeting supported the dollar, as many traders expect more active changes in monetary policy in December this year. However, all this can be prevented by a new strain of the Omicron coronavirus, the spread of which is actively observed in the eurozone and African countries. In the USA, this strain has not yet been registered, but it's only a matter of time. Euro buyers can only wait for hawkish statements from European politicians, which were actively voiced last week, which also supported the euro. The latest November COT report indicated that long non-profit positions rose from the level of 198,181 to the level of 204,214, while short non-profit positions also jumped from the level of 202,007 to the level of 220,666. At the end of the week, the total non-commercial net position increased to -16,452 against -3,826. The weekly closing price dropped to 1.1241 against 1.1367.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily moving averages, which indicates the continued growth of the euro.
Note: The period and prices of moving averages are considered by the author 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 event of a decline in the euro, the average border of the indicator around 1.1300 will act as support.
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 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 the short and long positions of non-commercial traders.
