Several market entry signals were formed yesterday. Let's take a look at the 5-minute chart and see what happened. I paid attention to 1.0236 in my morning forecast and advised you to make decisions on entering the market from it. Weak retail sales data and the lack of willingness to buy the euro, even in the region of the next annual low - all caused the pair to fall further. Unfortunately, after the breakthrough of 1.0236, I did not see a reverse test from the bottom up. I missed the entry point to short positions for this reason and remained out of the market. A breakthrough and consolidation below 1.0194 with a reverse test in the afternoon - all this led to a sell signal and the euro moved down 30 points to the next support at 1.0162. There, a false breakout in the middle of the US session gave a signal to buy, which caused the pair to recover to 1.0194 - another 30 points of profit.
When to go long on EUR/USD:
Yesterday's minutes of the Federal Reserve, as expected, did not change the balance of power in the market, as investors already understand the central bank's succeeding plans to regain control of inflation. There are no important statistics this morning and I advise you to pay attention to the volume of industrial production in Germany and the minutes of the European Central Bank meeting on monetary policy. Most likely, the market will react exactly the same to the ECB minutes as it did yesterday to the Fed. Speeches by ECB representative Philip Lane and others are unlikely to lead to a serious burst of volatility, so the focus will shift to the afternoon, which promises to be more interesting. We will talk about it in the forecast for the US session.
As long as trading is above 1.0200 during the European session, bulls will have chances for a correction. The optimal scenario for opening long positions is when a false breakout forms near this level, which creates a signal to enter the market, counting on an attempt to build at least some upward correction at the end of the week with the prospect of updating 1.0247, where the moving averages are, playing on the bears' side. Only a breakthrough and test of 1.0247 would hit bearish stops, opening up 1.0292. We can talk about a bearish market turning point only after a breakthrough of 1.0292, which will lead to an update of 1.0341 and 1.0384, where I recommend taking profits.
If the EUR/USD declines and there are no bulls at 1.0200, and this requires very disappointing data on the eurozone, I advise you not to rush to enter the market. The best option for opening long positions would be a false breakout in the support area of 1.0162. I advise you to buy EUR/USD immediately on a rebound only from a new annual low in the area of 1.0119, or even lower - in the area of 1.0072, counting on an upward correction of 30-35 points within the day.
When to go short on EUR/USD:
The bears are still coping with all the tasks, but today it is necessary to act more aggressively again. Weak statistics on the eurozone and Germany may put pressure on the pair, which will lead to its re-test of the intermediate support of 1.0200. A better option would be to sell on the euro's growth in the first half of the day after forming a false breakout in the area of 1.0247. This creates a signal to open short positions with the prospect of a return to 1.0200 and an update of annual lows. A breakthrough and consolidation below this range, as well as a reverse test from the bottom up - all this will lead to another sell signal with the removal of bulls' stops and a larger movement of the pair down to the 1.0162 area. A breakthrough and reverse test of 1.0162 from the bottom up will be evidence of a continuation of the bearish trend with the prospect of a quick decline to 1.0119, where I recommend completely exiting shorts. A more distant target will be the area of 1.0077.
If EUR/USD moves up during the European session, as well as the absence of bears at 1.0247, the upward correction may increase significantly, however, it will hardly be possible to expect a more rapid upswing of the pair before the release of important statistics on the US labor market. With growth above 1.0247, I advise you to postpone short positions to a more attractive level of 1.0292. Forming a false breakout there will be a new starting point for a downward correction of the pair. You can sell EUR/USD immediately on a rebound from the high of 1.0341, or even higher - in the area of 1.0384, counting on a downward correction of 30-35 points.
COT report:
The Commitment of Traders (COT) report for June 28 again logged a reduction in both long and short positions, but this did not lead to forming a larger negative delta, since there were much fewer short positions than long ones. European Central Bank President Christine Lagarde spoke last week, as did Federal Reserve Chairman Jerome Powell. They all spoke of the need to further raise interest rates in order to combat the highest inflation in recent memory. Let me remind you that this month the ECB intends to start raising interest rates, which should limit the dollar's upward potential against the euro. The data on inflation in the euro area, released last week, became another proof that it is no longer possible to delay. However, given the current situation in the global economy, there is now more demand for safe haven assets. We are waiting for parity in the EUR/USD pair. The COT report indicated that long non-commercial positions decreased by 6,140 to 189,414, while short non-commercial positions decreased by 11,149 to 200,010. In many developed countries - all this continues to push for long positions on the dollar. At the end of the week, the total non-commercial net position remained negative and amounted to -10,596 against -15,605. The weekly closing price dropped and amounted to 1.0584 against 1.0598.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50-day moving averages, which indicates market uncertainty.
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, the lower border of the indicator around 1.0162 will act as support. In case of growth, the upper border of the indicator in the area of 1.0200 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.
