In my morning forecast, I paid attention to the 1.0420 level and recommended making decisions on entering the market from it. Let's look at the 5-minute chart and figure out what happened there. A less serious reduction in industrial production in the eurozone and quite tolerable inflation data in France and Spain led to a slight upward jerk of the euro to the resistance area of 1.0420. However, it was not possible to break above this range. The formation of a false breakdown there, according to the morning scenario, led to a good entry point into short positions, followed by a sell-off to the support area of 1.0377. This allowed us to take about 40 points of profit from the market. At the time of writing, a false breakout was formed at 1.0377, which is a signal to buy the pair. Until the moment when trading is conducted above 1.0377, you can count on the return of the euro to the daily highs. For the second half of the day, the technical picture, as well as the strategy itself, has not changed in any way. And what were the entry points for the pound this morning?
To open long positions on EURUSD, you need:
All attention will now be focused on the US data. And although statistics are not of great importance, a surge in volatility may occur after the publication of a report on the consumer sentiment index from the University of Michigan. If growth is recorded, and not a reduction in the indicator, the pressure on the euro will increase, and we will see a second return to the morning support area of 1.0377. If the data disappoints dollar buyers, we cannot rule out a second dash back to the daily highs. However, I advise you to bet on a further fall of the EUR/USD pair. As I noted, while trading will be conducted above 1.0377, you can keep a long in the expectation of a return and a breakout of 1.0420. But a new signal to buy the euro will only be a decline after the data and the formation of a false breakdown near the support of 1.0377. This will give a good entry point into long positions and will make sure that there is interest in the euro from major players at the end of this week. The calculation will be on the return of the initiative by buyers with subsequent growth and breakdown of 1.0420 - a large level where the moving averages are located, additionally limiting the upward potential of the pair. Going beyond this range can also occur in the case of rather passive performances by FOMC members. Neil Kashkari and Loretta Mester will deliver a speech immediately after the publication of several macroeconomic indicators. A breakout and a top-down test of 1.0420 form a new signal to enter long positions, strengthening buyers and opening up the opportunity for further growth of EUR/USD to the area of 1.0463, where I recommend fixing the profits. A more distant target will be the 1.0512 area. In the event of a decline in EUR/USD and the absence of buyers at 1.0377, which is more likely, the optimal scenario for buying will be a false breakdown near this year's new low of 1.0341. However, I advise buying from this level only on a false breakdown and with confirmation of divergence on the MACD indicator. It is possible to open long positions on the euro immediately for a rebound only from 1.0306, or even lower - around 1.0255 with the aim of an upward correction of 30-35 points within a day.
To open short positions on EURUSD, you need:
Sellers coped with the task and failed the euro to the first support level, where they did not force events. The primary task of the bears for the second half of the day will be a breakthrough and consolidation below 1.0377. A bottom-up reverse test of this level, as well as good reports on the consumer sentiment index and the inflation expectations index from the University of Michigan - all this will give an additional signal to open short positions with the prospect of updating new local lows around 1.0341 and 1.0306, where I recommend fixing the profits. In case of increased talk of more aggressive measures by the Fed, do not be surprised if we get to 1.0255 in the near future. In the scenario of EUR/USD growth after the data, the best option for opening short positions will be the formation of a false breakdown in the area of the morning resistance of 1.0420. In the absence of bears at this level, I expect a sharper upward pull of the pair at the end of this week. The best option, in this case, will be short positions when forming a false breakdown in the area of 1.0463. You can sell EUR/USD immediately on a rebound from 1.0512 with the aim of a downward correction of 25-30 points.
The COT report (Commitment of Traders) for May 3 recorded a sharp increase in short positions and a reduction in long ones. Recent statements by representatives of central banks have led to a new active sale of risky assets, as it is obvious to everyone that serious problems in the economies of developed countries cannot be avoided this year. A sharp increase in interest rates in the US by 0.5% at once also makes investors look at the US dollar as a safe-haven asset. High inflation is a problem not only in the US, but also around the world, and the active tightening of monetary policy by the US central bank makes the dollar a more attractive asset. The President of the European Central Bank in her speeches has also repeatedly noted the need for more active policy changes. It is expected that the bond purchase program will be completed by the end of the second quarter of this year, and the first-rate increase will occur in the fall of this year. While the ECB is planning, the Fed is acting. Hence the attractiveness of the dollar. Much will depend on American inflation and market reaction. In the event of a slight decline this week, the pressure on the euro will weaken, which will lead to the strengthening of risky assets and will allow building a small upward correction in EUR/USD. The COT report indicates that long non-commercial positions decreased from the level of 221,003 to the level of 208,449, while short non-commercial positions increased sharply from the level of 189,702 to the level of 214,827. It is also worth noting that the low exchange rate of the euro makes it more attractive to traders, so even against the background of changes in the balance of power in favor of sellers, this asset remains quite attractive for medium-term investors. At the end of the week, the total non-commercial net position decreased and amounted to -6,378. The weekly closing price collapsed and amounted to 1.0545 against 1.0667.
- 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 use the futures market for speculative purposes and to 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.
