To open long positions on EURUSD, you need:
In my morning forecast, I paid attention to the 1.1276 level and advised him to make decisions on entering the market. Let's look at the 5-minute chart and figure out what happened. Inflation data in the eurozone countries, released in the first half of the day, did not have the expected effect, as they coincided with economists' forecasts. As a result, the euro stalled around the 1.1276 level. Several false breakouts of this range led to the formation of signals to open short positions. So far, the maximum downward movement from the entry point is 10 points, but the calculation for a larger drop in the euro remains. While trading will be conducted below 1.1276, we can expect the development of a bearish scenario. From a technical point of view, nothing has changed.
The entire focus in the afternoon will be on tightening monetary policy by the Federal Reserve. If the central bank governors surprise us with something, for example, they announce a more active curtailment of measures to support the economy – only in this case, we can count on a sharp drop in the EUR/USD pair. If all the reports coincide with economists' expectations, the euro may significantly strengthen its position, counting on a more aggressive policy from the European Central Bank tomorrow. From the buyers' point of view, the optimal entry point for long positions remains the formation of a false breakdown in the area of 1.1255, which was formed following the results of the Asian session. However, this level is intermediate, and if we do not see bull activity on it, it is better not to rush into the decision to enter the market. An equally important task will be the return to control of the rather important resistance of 1.1276, which could not be done in the first half of the day. Moving averages that play on the buyers' side pass above it, so the breakdown will be quite active. But in addition to the Fed meeting, do not forget about the fundamental statistics on the United States. A sharp increase in the volume of retail trade and the Empire Manufacturing manufacturing index will lead to a strengthening of the US dollar within the day and will only increase pressure on the euro. Weak data, on the contrary, will make it possible to break above 1.1276, and a reverse test of this level from top to bottom will form an additional entry point into euro purchases with the prospect of a return to 1.1301. Above this level, only the area of 1.1323 remains, which acts as the upper boundary of a wide side channel. Its breakdown can seriously affect the EUR/USD downward trend, so be very careful at this level. A breakout and a top-down test of 1.1323 will lead to a larger increase in the area of the highs: 1.1353 and 1.1381. A more distant target will be the 1.1415 level, where I recommend fixing the profits. If the pair declines during the American session and there is no bull activity at 1.1255, it is best to postpone sales to larger support at 1.1230. I advise buying EUR/USD immediately for a rebound from the minimum of 1.1208, or even lower - around 1.1188 with the aim of an upward correction of 20-25 points within a day.
To open short positions on EURUSD, you need:
Sellers coped with the morning task and managed to defend the resistance of 1.1276. While trading will be conducted below this range, we can expect a further decline in the euro, especially in the case of strong fundamental statistics on retail sales in the United States. The main task of the bears for the second half of the day remains to protect the 1.1276 level, just above which the moving averages are playing on the sellers' side. Only the next formation of a false breakdown there, together with strong US data, will lead to an excellent entry point into short positions in the hope of maintaining pressure on the pair. An equally important task for EUR/USD sellers is to break through the intermediate support of 1.1255, which was formed following the results of the Asian session. A breakdown and a bottom-up test of 1.1255 will lead to the formation of a signal to open short positions with the prospect of a decline in the area of 1.1230. A more distant target will be the 1.1208 level, where I recommend fixing the profits. In the case of the growth of the euro and the absence of bear activity at 1.1276, it is best not to rush with sales. The optimal scenario will be short positions when forming a false breakdown in the area of 1.1301. It is possible to sell EUR/USD immediately on a rebound from the highs: 1.1323 and 1.1353 with the aim of a downward correction of 15-20 points. However, all this is valid only until the publication of the Federal Reserve's decision on interest rates.
The COT report (Commitment of Traders) for December 7 recorded a decrease in short positions and a slight increase in long ones, which led to a decrease in the negative value of the delta. Many traders were preparing for the meetings of central banks that will be held this week. Very serious changes are expected in the monetary policy of the Federal Reserve System, as well as the European Central Bank. The inflation data force the management to act more aggressively, but which way it will choose is a rather difficult question. Last week there were several speeches by the Chairman of the Federal Reserve System Jerome Powell, who in his comments spoke enough about the expected changes in monetary policy towards its tightening. The omicron coronavirus strain also prevents Europeans and Americans from sleeping peacefully, which constrains demand for risky assets in the face of uncertainty about the future policy of the European Central Bank. The latest November COT report indicated that long non-commercial positions rose from the level of 191,048 to the level of 194,869, while short non-commercial positions fell from the level of 214,288 to the level of 203,168. This suggests that traders preferred to fix part of the profit before important events in the conditions of the formed side 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 side channel - 1.1283 against 1.1292.
Signals of indicators:
Moving averages
Trading is below 30 and 50 daily moving averages, which indicates continued pressure on 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
A breakthrough of the lower limit of the indicator in the area of 1.1255 will increase the pressure on the pound. A breakthrough of the upper limit of the indicator in the area of 1.1276 will lead to a new wave of euro growth.
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.
