To open long positions on EUR/USD, you need:
Several signals to enter the market were formed yesterday. Let's take a look at the 5 minute chart and understand the entry points. In my morning forecast, I paid attention to several levels, from which it was necessary to make decisions on entering the market. In the absence of important fundamental statistics on the eurozone, the bulls of the euro took advantage of the moment of the formation of a false breakout in the area of 1.1265, which resulted in forming a point of entry into the market and then to an increase in the resistance area of 1.1291. A breakthrough of this level occurred without a reverse test from top to bottom, so it was not possible to add to long positions. In the second half of the day, one could observe the bulls' unsuccessful attempt to break through above 1.1318 and the formation of a false breakout at this level, which resulted in creating an excellent entry point into short positions. The euro fell by about 50 points. And what were the entry points for the pound yesterday?
Today is an important day, but before you sit back and wait for the results of the Federal Reserve meeting, it will be useful to familiarize yourself with the inflation reports in the eurozone countries. They can indirectly affect tomorrow's results of the European Central Bank meeting and provide support for the euro. From the bulls' point of view, the optimal entry point into long positions will be the formation of a false breakout in the 1.1255 area, which was formed following the Asian session. An equally important task is to return to a rather important resistance at 1.1276, above which the moving averages, playing on the side of bulls, pass. Strong data on inflation growth in France and Italy in November this year will lead to a breakdown and test of this level from top to bottom, which will form an additional entry point for buying the euro with the prospect of a return to 1.1301. Only the 1.1323 area remains above this level, which is the upper border of the wide horizontal channel. Its breakdown can seriously affect the EUR/USD downward trend, so be very careful at this level. A breakthrough and a downside test of 1.1323 would see a larger rally towards the highs of 1.1353 and 1.1381. The next target will be the 1.1415 level, where I recommend taking profits. If the pair declines during the European session and the bulls are not active at 1.1255, it is best to postpone selling until the larger support at 1.1230. I advise you to buy EUR/USD immediately on a rebound from the 1.1208 low, or even lower - around 1.1188, counting on an upward correction of 20-25 points within the day.
To open short positions on EUR/USD, you need:
The bears seize the moment and each time they enter the market with any active attempt to push the euro upwards. Yesterday we could see a repeat of last Friday, when the bulls never managed to break through above 1.1323. Today we have a Fed meeting and many expect the US dollar to strengthen, although I would not bet on that. I described the reasons for this in detail in my review: The final Fed meeting this year will be held without surprises. The bears' main task in the first half of the day is to protect the 1.1276 level, slightly above which are the moving averages playing on the side of the bears. Forming a false breakout there, together with weak data on inflation in Italy and France, will lead to an excellent entry point into short positions in the hope of maintaining pressure on the pair. An equally important task for the EUR/USD bears is a breakthrough of the intermediate support at 1.1255, which was formed following the Asian session. A breakdown and a test from below 1.1255 will lead to the formation of a signal to open short positions with the prospect of a decline to the area of 1.1230. The next target will be the 1.1208 level, where I recommend taking profits. If the euro grows and the bears are not active at 1.1276, it is best not to rush to sell. The optimal scenario will be short positions when a false breakout is formed in the 1.1301 area. Selling EUR/USD immediately on a rebound is possible from the highs: 1.1323 and 1.1353, counting on a downward correction of 15-20 points. However, all this is valid only until the announcement of the Fed's decision on interest rates.
I recommend for review:
The Commitment of Traders (COT) report for December 7 revealed that short positions decreased and long ones slightly increased, which led to a decrease in the negative delta value. Many traders have been preparing for the central bank meetings this week. Very serious changes are expected in the monetary policy of the Federal Reserve, as well as the European Central Bank. The inflation data is forcing the management to act more aggressively, but knowing which path it will take is rather difficult. Last week, there were several speeches by Fed Chairman Jerome Powell, who in his comments talked enough about the expected changes in monetary policy towards tightening. The Omicron coronavirus strain is also keeping Europeans and Americans awake, dampening demand for risky assets amid uncertainty over the ECB's future policy. The latest November COT report indicated that long non-commercial positions rose from 191,048 to 194,869, while short non-commercials fell from 214,288 to 203,168. important events in the conditions of the formed horizontal channel. At the end of the week, the total non-commercial net position decreased its negative value from -23,240 to -8,299. The weekly closing price, on the contrary, did not change due to the horizontal channel - 1.1283 against 1.1292.
Indicator signals:
Trading is carried out below the 30 and 50 daily moving averages, which indicates a return of pressure on the euro.
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
In case of a decline, support will be provided by the lower border of the indicator in the area of 1.1230. In case of growth, the upper border of the indicator at 1.1315 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.
