On Friday, traders received just one signal to enter the market. Let us take a look at the 5-minute chart to figure out what happened. Earlier, I asked you to pay attention to the level of 1.0654 to decide when to enter the market. The pair quickly climbed to this level, showed a false breakout, and formed a buy signal. As a result, the pair dropped by 30 pips. There were no other points to enter the market.
Conditions for opening long positions on EUR/USD:
Although the euro is falling now, hawkish hints dropped by the ECB on Thursday and inflation rise to 10.1% in November allow traders to expect further growth in the euro. However, the currency is unlikely to show a rapid increase as we saw in late November-early December. Today, traders are likely to be focused on the Ifo expectations, current assessment, and business climate reports. This data from Germany may support the euro, especially if the figures exceed the forecast. If the pair declines in the first part of the day amid the reports, it will be wise to go long after a false breakout near the closest support level of 1.0581. This will allow buyers to enter the market and improve the market situation, thus boosting the euro above 1.0621, a resistance level formed on Friday. There, we can see bearish MAs. A breakout and a downward test of this level could give an additional entry point with the target at 1.0659. However, the pair is unlikely to surpass this level today. Only a downward test of 1.0659 will affect bears' stop orders, thus forming an additional signal to enter the market with the target at 1.0703, where it is recommended to lock in profits. If the euro/dollar pair declines and buyers fail to protect 1.0584, pressure on the pair will surge, thus causing a downward correction. A breakout of 1.0581 will push the asset to the next support level of 1.0540, thus overshadowing all the gains recorded in December. There, traders may open buy orders only after a false breakout. It is also possible to go long just after a bounce off 1.0495 or even lower – from 1.0446, expecting a rise of 30-35 pips within the day.
Conditions for opening short positions on EUR/USD:
Sellers are likely to become more and more active, especially near the closest resistance level of 1.0621. Weak data from Germany may cap the euro's upward potential, but this will hardly happen today. Thus, under the current conditions, it will be better to go short after a false breakout near the resistance level of 1.0621. This will allow the pair to slide to the support level of 1.0581. A breakout and a test of this level will return the euro under pressure, thus forming an additional sell signal with the target at 1.0540. A settlement below this level will push the euro even deeper to 1.0495. This will give hope for a bearish trend. The farthest target is located at 1.0446, where it is recommended to lock in profits. If the euro/dollar pair increases during the European session and bears fail to protect 1.0621 amid strong data from Germany, the price is likely to go beyond 1.0659. Notably, both bears and bulls want to gain control over this level. There, traders may open short orders only after an unsuccessful settlement at this level. Traders may also go short after a rebound from the high of 1.0703, expecting a decline of 30-35 pips.
COT report
According to the COT report from December 6, the number of both long and short positions increased. Strong business activity data from the US slightly overshadowed the eurozone GDP report for the third quarter, which was upwardly revised. Thanks to this demand for risk assets remained intact. However, the situation may alter this week because of the publication of the US inflation figures. Notably, the US inflation may rise against the forecast. In this case, the market situation will change again. Later, the Fed will hold a meeting. Jerome Powell may switch to a more hawkish stance, thus supporting the greenback. If inflation continues falling, the euro may show a jump by the end of the year. The COT report unveiled that the number of long non-commercial positions increased by 3,941 to 245,063, while the number of short non-commercial positions rose by 1,305 to 120,180. At the end of the week, the total non-commercial net position increased slightly to 123,113 against 122,234. This indicates that investors are still optimistic and are ready to continue buying the euro at current levels. They just need a new fundamental reason. The weekly closing price decreased to 1.0315 from 1.0342.
Signals of indicators:
Moving Averages
Trading is performed slightly below 30- and 50-day moving averages, which still points to the bearish trend.
Note: The period and prices of moving averages are considered by the author on the one-hour chart which differs from the general definition of the classic daily moving averages on the daily chart.
Bollinger Bands
If the pair advances, a resistance level could be seen at 1.0630, the upper limit of the indicator. In case of a decline, the lower limit of the indicator located at 1.0581 will act as support.
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 are the total number of long positions opened by non-commercial traders.
- Short non-commercial positions are the 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.
