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 the 1.0000 level in my morning forecast and advised you to make decisions on entering the market. Despite a slight downward movement, which was a continuation of the pair's fall during the Asian session, it was not possible to reach the level of 1.0000, so I did not see a false breakout there, which did not allow me to enter the market in long positions. The euro fell below 1.0000 in the afternoon, but the bulls being active and a false breakout at 0.9958 - all this led to a signal to open long positions and the euro surged up by more than 70 points. Regaining control over 1.0000 and the reverse downward test provided another buy signal with the pair rising by another 30 points.
When to go long on EUR/USD:
Producer prices in the US were higher than economists' forecasts, but lower than in May, which did not allow the dollar to consolidate below 1.0000. Against this background, the technical picture has not changed in any way, so I advise you to act exactly the same as yesterday. Only the data on the trade balance of the eurozone will be released this morning. It is unlikely that this indicator will greatly help the euro, since its decline will most likely be noted. As long as trading is above 1.0000, in my opinion, bulls will still have chances for an upward correction. In case the pair goes down, bulls will have to defend the nearest support at 1.0001. When updating this level, you can count on any upward movement by analogy with what we observed yesterday when a false breakout is formed. However, it is worth noting that 1.0001 has not only been tested, but also broken through, so if there is no active upward movement from this level, most likely the bearish trend will continue at the end of the week. In case of growth from 1.0001, the nearest target will be resistance 1.0057, just below which are average moving averages playing on the bears' side. A breakthrough and test of this range would hit the stops, signaling long positions with the possibility of a bigger upward movement to 1.0116. However, we can talk about the continuation of the upward correction only after the US reports. The bears will try to build the upper limit of the downward channel at the level of 1.0116, so the growth will be clearly limited. A more distant target will be the area of 1.0182, where I recommend taking profits.
In case EUR/USD falls and there are no bulls at 1.0001, which is more likely, the pressure on the euro will seriously increase again. In this case, I advise you not to rush to enter the market: the best option for opening long positions would be a false breakout around 0.9958, by analogy with what I analyzed above. I advise you to buy EUR/USD immediately on a rebound only from the level of 0.9915, or even lower - in the region of 0.9886, counting on an upward correction of 30-35 points within the day.
When to go short on EUR/USD:
As long as trading is below 1.0057, everyone will be counting on a further fall of the euro against the US dollar, similar to what happened yesterday. But now the bears will try to maintain parity in the hope of a more powerful fall in EUR/USD until the US interest rate rises later this month. Let me remind you that after the inflation report, we are now talking about an increase immediately by 1%. In case EUR/USD grows in the first half of the day, forming a false breakout near the nearest resistance 1.0057, by analogy with what I analyzed above, creates a signal to open short positions with the prospect of a further decline in EUR/USD and a return to support 1.0001, which is the last "stop" before the change in the parity of the euro against the dollar. 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 0.9958 area. A breakthrough and consolidation below is a direct road to 0.9915, where I recommend completely leaving short positions. A more distant target will be the area of 0.9886.
In case EUR/USD moves up during the European session, as well as the absence of bears at 1.0057, I advise you to postpone short positions until the more attractive resistance of 1.0116, where the moving averages pass. Like yesterday, forming a false breakout at 1.0116 could be a new starting point for the continuation of the bear market. You can sell EUR/USD immediately on a rebound from the high of 1.0182, or even higher - in the area of 1.0271, counting on a downward correction of 30-35 points.
COT report:
The Commitment of Traders (COT) report for July 5 logged an increase in both long and short positions, but the latter turned out to be almost twice as large, which indicates that the bearish mood in the market remains. This resulted in forming a larger negative delta. Eurozone retail sales disappointed last week, while US labor market data, on the contrary, pointed to the need to continue to maintain the over-aggressive monetary policy by the Federal Reserve if they are serious about fighting high inflation. European Central Bank President Christine Lagarde also spoke and talked a lot about the need to start raising interest rates all with the same goal. A rather important inflation report in the US is expected in the near future, which may once again point to another jump in price growth. If this happens, you will not be surprised at the dollar's further growth against the euro and the achievement of parity for this instrument. The COT report found that long non-commercial positions rose 7,724 to 197,138, while short non-commercial positions rose 13,980 to 213,990. 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 -16,852 against -10,596. The weekly closing price dropped and amounted to 1.0316 against 1.0584.
Indicator signals:
Moving averages
Trading is conducted 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 0.9980 will act as support. In case of growth, the upper border of the indicator in the area of 1.0057 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.
