Yesterday, the euro was moving in one direction. Let's take a look at the 5-minute chart to clear up the market situation. Earlier, I asked you to pay attention to the level of 1.0675 to decide when to enter the market. A break and settlement above this level as well as a downward test led to a long signal, which allowed the pair to climb to the resistance level of 1.0727. As a result, the pair gained about 50 pips. Although a false break of 1.0727 occurred, the sell signal did not bring the expected income.
Conditions for opening long positions on EUR/USD:
Data on the US labor market increased pressure on the greenback as it turned out to be worse than expected. Today's report on the APD non-farm employment change will be very important. However, in the first part of the day, the eurozone is going to disclose a bulk of information. Reports on the services PMI in Germany, Italy, and the eurozone as well as on the eurozone composite PMI will hardly affect the pair since they are expected to be quite positive. A jump in the eurozone retail sales recorded in April may also encourage buyers of the euro, who foresee a break of monthly highs. If the pair drops amid the reports, only a false break of 1.0731 will give a long signal with the target at the monthly high of 1.0784. A break and a downward test of this level will seriously affect sellers' stop orders, thus giving a new long signal. In this case, the pair will have a chance to climb to fresh highs of 1.0811 and 1.0844. If the US discloses weak data, the pair may even surge to 1.0894. If the euro/dollar pair drops and bulls fail to protect 1.0731, pressure on the euro will jump. Against the backdrop, the currency may slide to 1.0685. That is why long positions could be opened after a false break. It is also possible to go long from 1.0640 or lower – from 1.0596, expecting a rise of 30-35 pips within one day.
Conditions for opening short positions on EUR/USD:
Sellers have lost control over the market and now they have to protect the nearest resistance level of 1.0784. The pair is highly likely to test this level today. Weak data from the eurozone and a slump in services PMI may exert pressure on the euro, helping sellers to protect 1.0784. A false break of this level will provide traders with a short signal. In this case, the euro/dollar pair may slide to the support level of 1.0731. A break and settlement below 1.0731 as well as an upward test of this level will give an additional sell signal, affecting buyers' stop orders and pushing the price to 1.0685. A break and settlement below 1.0685 will take place only in case of very strong data on the US labor market. Against the backdrop, a farther target will be located at 1.0640, where it is recommended to lock in profits. If the euro/dollar pair increases during the European session and bears fail to protect 1.0784, buyers are likely to benefit from the situation. In other words, the pair will resume its uptrend. Thus, it will be better to open short positions after a false break of 1.0811. It is also possible to sell the asset from the monthly high of 1.0844 or higher – from 1.0894, expecting a decline of 30-35 intraday.
COT report
According to the COT report from May 24, the number of long positions advanced, whereas the number of short positions dropped. Traders continued opening long positions, expecting a more aggressive monetary policy from the ECB. Although last week, there were less comments about a key interest rate hike in the near future, the euro/dollar pair managed to retain its upward potential. Now, analysts suppose that the ECB will raise the deposit rate by one-fourth of a basis point as early as July. The next two hikes will take place in September and December. By the end of the year, the benchmark rate is expected to be at the level of 0.25%. However, some experts are sure that the central bank will have to take more aggressive measures. A lot depends on the inflation report for May of this year. The indicator may jump to 7.7% on a yearly basis, thus increasing pressure on politicians. Against the backdrop, the regulator may raise the key interest rate up to 0.5% from the current zero level. The COT report unveiled that the number of long non-commercial positions increased by 6,302 to 237,072 from 230,770, while the number of short non-commercial positions declined by 12,289 to 198,142 from 210,431. The euro's low price is making the currency more attractive for mid-term traders. According to the weekly results, the total non-commercial net position increased to 38,930 from 20,339. The weekly close price jumped to 1.0734 from 1.0556.
Signals of indicators:
Moving Averages
Trading is performed above 30- and 50-day moving averages, thus pointing to an attempt to resume the uptrend. .
Note: The period and prices of moving averages are considered by the author on the one-hour chart that differs from the general definition of the classic daily moving averages on the daily chart.
Bollinger Bands
In case of a decline, the lower limit of the indicator located at 1.0705 will act as support. If the pair grows, the resistance level will be located at the higher limit of the indicator at 1.0784.
Description of indicators- Moving average (moving average, determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph.
- MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9.
- Bollinger Bands. The period is 20.
- Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions is a total number of long positions opened by non-commercial traders.
- Short non-commercial positions is a total number of short positions opened by non-commercial traders.
- The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.
