Several interesting market entry signals were formed yesterday. I suggest you take a look at the 5-minute chart and figure out what happened. I paid attention to the 0.9687 level in my morning forecast and advised making decisions on entering the market there. As a result of the decline to the area of 0.9687, the bulls were active and managed to form a false breakout there, which led to a signal to buy the euro. At the moment, the pair went up by about 20 points, but if you were more persistent, you could see an increase by 60 points. In the afternoon, exactly the same situation occurred with a false breakout at 0.9685, from where the pair went up about 40 points.
COT report:
Before talking about the further prospects of the EUR/USD movement, let's look at what happened in the futures market and how the positions of the Commitment of Traders have changed. The October 4 Commitment of Traders (COT) report logged a sharp decline in both short and long positions. Many investors and major players now prefer to take a wait-and-see attitude, especially given the extent to which geopolitical tensions have reached. Against this background, there is no doubt about the demand for the US dollar, and if we add here the latest data on the US labor market and the expected September inflation: we can confidently say that the euro has not yet reached final lows against the US dollar and that in the near future we can expect the final annual sale of risky assets. The COT report indicated that long non-commercial positions decreased by 9,345 to 199,391, while short non-commercial positions decreased by 19,230 to 155,709. At the end of the week, the total non-commercial net position remained positive and amounted to 43,682 against 33,797. This indicates that investors are taking advantage of the moment and continue to buy cheap euros below parity, as well as accumulate long positions, counting on the end of the crisis and the pair's recovery in the long term. The weekly closing price recovered and amounted to 1.0053 against 0.9657.
When to go long on EUR/USD:
This morning there are no important statistics on the euro area, so you can focus on the speech of European Central Bank executive board member Philip Lane. However, it is unlikely that he will mention anything surprising. If he does touch on the topic of monetary policy after the recent record inflation growth in the eurozone, the bulls can seize the moment and take a good walk on the bears' stop orders. In case of a negative reaction to the statements, forming a false breakout in the area of the nearest support of 0.9685, which repeatedly saved the bulls from a major decline of the euro, will be a reason to open long positions in anticipation of the development of an upward correction. In this case, we can expect an update of resistance 0.9724, formed on the basis of yesterday. There are also moving averages, playing on the bears' side. Only a breakthrough and a downward test of this range will make it possible to get to a new high in the 0.9766 area, giving hope of the pair's return with the possibility of a larger move up to 0.9805. The farthest target will be the area of 0.9841, where I recommend taking profits.
In case EUR/USD falls and the bulls are not active at 0.9685, which I have little doubt, the situation will remain under the bears' control, which will make it possible to maintain the bearish trend in order to update the low of 0.9646. From this level, I recommend buying also only on a false breakout. I advise you to open longs on EUR/USD immediately for a rebound only from the support of 0.9596, or even lower - in the area of the annual low of 0.9540, counting on an upward correction of 30-35 points within the day.
When to go short on EUR/USD:
Bears are in control of the market and today they have already achieved a new weekly low - this indicates the continuation of the bearish trend. Given the current foreign policy picture on the world stage, there are hardly many who want to bet on the growth of risky assets. It is best to look for convenient entry points to sell the euro. A good option would be a false breakout in the area of the nearest resistance at 0.9724, growth to which may occur after the speech of the representatives of the ECB. Failure to consolidate at 0.9724 will lead to the euro moving down to the area of 0.9685, for which an active struggle is being waged now. A breakdown and consolidation below this range, as well as a reverse test from the bottom up, create a sell signal with the removal of bulls' stop orders and a decrease in the euro to 0.9646, where I recommend taking profits. We can expect to go beyond this level only if we receive strong statistics from the US, which we will talk about in another forecast. But if this happens in the first half of the day, the next support will be the area of 0.9596.
In case EUR/USD moves up during the European session, as well as the absence of bears at 0.9724, we can expect a larger upward move for the pair. Then I advise you to postpone shorts until 0.9766. Forming a false breakout there will be a new starting point for entering shorts. You can sell EUR/USD immediately for a rebound from the high of 0.9805, or even higher - from 0.9841, counting on a downward correction of 30-35 points.
Indicator signals:
Moving averages
Trading is below 30 and 50 moving averages, which indicates a further fall in the euro.
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, support will be provided by the lower border of the indicator around 0.9680. A breakthrough of the upper border of the indicator in the area of 0.9724 will lead to the euro's growth.
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.
