Yesterday, there was only one market entry signal. Let us have a look at the 5-minute chart and see what happened. In my morning forecast, I focused on the level of 1.1029 and recommended making market entry decisions with this level in mind. The pair moved down and performed a false breakout of 1.1029, which created a buy signal and led to an upward movement of over 30 points. There were no suitable entry points in the second half of the day.
When to open long positions on EUR/USD:
Before looking at possible future trajectory of EUR/USD, let us see what happened in the futures market and the Commitment of Traders report. In the COT report for May 2, long positions continued to grow while short positions decreased. This report does not yet account for significant market changes after the Federal Reserve and European Central Bank meetings last week, so traders should not focus on it too much. Both central banks raised rates by 0.25%, maintaining market balance while allowing risk asset bulls to expect further growth. There is no important data this week, so traders can relax a bit. The COT report shows non-commercial long positions increased by 3,316 to 246,832, while non-commercial short positions decreased by 773 to 73,343. As a result, the overall non-commercial net position increased to 173,489 compared to 144,956 the week before. The weekly closing price dropped to 1.1031 from 1.1039.
Unfortunately, there are no data releases today that would support the euro, so it would not be a surprise if the pair continues to trade within a wide sideways channel formed this month. Speeches by ECB representative Philip Lane and ECB Executive Board member Isabel Schnabel are unlikely to cause a significant volatility spike, but the market would be quite dull without them. If there is a negative reaction, it would be nice to see bulls become active around the critical support level of 1.0969, which was formed after the European Central Bank's interest rate decision last week. Only a false breakout of this level would present an entry point for opening long positions. The pair could then recover and extend a new bullish trend, hitting the nearest resistance at 1.0999. A breakout and a downward retest of this range would also create a buy signal. This would open the way towards 1.1029. The moving averages in this area favor bearish traders. If EUR/USD overtakes this level, it would make a more significant upward movement towards the high at 1.1060 more likely. I would take profits at that level. The most distant target is the monthly high in the 1.1090 area.
If EUR/USD declines and bulls are idle at 1.0969, which is quite likely, pressure on the euro will intensify. In this situation, only a false breakout of the lower boundary of the wide sideways channel at 1.0944 would create a buy signal. I will go long on EUR/USD immediately if it bounces off the low at 1.0911 or around 1.0867, targeting an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Currently, bears maintain control of the market. If the pair rises, they will need to be proactive around 1.0999. A false breakout of that level would create a sell signal to extend the downward correction. This could lead the euro to drop toward the nearest support at 1.0969. A breakout and a consolidation below this level, coupled with an upward retest, will create an additional sell signal, pushing the pair to 1.0944. A breakout below this level may only occur later in the day. The target would be the support at 1.0911, where profits would be locked in. If EUR/USD rises during the European session and bears are idle at 1.0999, which is probable given hawkish statements from European Central Bank representatives, bulls might not regain market control, but the pressure on the euro would decrease. In that case, short positions should be opened only around 1.1029. A false breakout there would create a new entry point for short positions. I will sell EUR/USD immediately if it bounces off the high of 1.1060 or around 1.1090, targeting a downward correction of 30-35 pips.
Indicators' signals:
Moving averages:
Trading is carried out below the 30-day and 50-day moving averages, which indicates continued pressure on the pair.
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands:
If the pair declines, the lower boundary of the indicator at 1.0969 will offer support. If EUR/USD increases, the upper boundary of the indicator at 1.1045 will serve as resistance.
Description of indicators
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart. Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.
