In my morning forecast, I drew attention to the 1.0973 level and recommended entering the market from there. Let's look at the 5-minute chart and figure out what happened there. The growth and formation of a false breakout at 1.0973 led to an excellent sell signal for the euro, which I discussed in detail in my morning forecast, resulting in a nearly 30-point decline in the pair. The technical picture has changed slightly for the second half of the day.
To open long positions on EUR/USD:
In the second half of the day, we await important fundamental statistics from the US, which may set the direction for the pair until the end of the week. Inflation data is expected: a decrease in prices, contrary to economists' forecasts, will positively affect the European currency and weaken the dollar's position, leading to the growth of EUR/USD. If US inflation turns out to be higher than economists' expectations and rises in April this year, the pressure on the pair is likely to increase, so I advise not to rush with purchases in such a case. I will open long positions on the euro only after forming a false breakout around the 1.0950 level, which has performed well recently. This will lead to a buy signal with growth to resistance at 1.0981, which could not be breached today. A breakthrough and top-down test of this range will strengthen buyers' confidence, returning the pair to a bullish mood and forming an additional entry point for building long positions with an update of the 1.1004 level. The ultimate target will be the 1.1029 area, where I will fix the profit.
In the case of a decline in EUR/USD and the absence of buyers at 1.0950, which is quite likely, the pressure on the euro will only intensify, leading the pair to break the wide sideways channel and form a new bearish trend. In such a case, only a false breakout in the next support area at 1.0878 will be a reason to buy the euro. I will open long positions on EUR/USD immediately on a rebound from the minimum of 1.0834, or even lower – in the area of 1.0792, with a target of an upward correction of 30-35 points within the day.
To open short positions on EUR/USD:
Sellers clearly showed that they are going nowhere, and it is too early to write them off, at least until the US statistics are released. The whole focus is on American statistics and the 1.0981 level formed during the first half of the day. In the case of growth, bears will again get an excellent chance to defend and form a false breakout in the 1.0981 area, where moving averages pass, playing on the sellers' side. This will form a good entry point for short positions like the one I discussed earlier. The prospect of an update will be at the nearest level of 1.0950. Consolidation below this range and a reverse test from bottom to top – a direct path to 1.0919. The ultimate target will be a minimum of 1.0878, where profits will be fixed.
In the event of an upward movement of EUR/USD during the American session and the absence of bears at 1.0981, and considering the nature of the market, this scenario cannot be ruled out. I will postpone short positions until the level of 1.1004. I will also sell only after a failed consolidation. I plan to open short positions immediately on the rebound from the maximum of 1.1029, aiming for a downward correction of 30–35 points.
The COT report (Commitment of Traders) on May 2nd showed an increase in long positions and a decrease in short positions. It should be noted that this report still needs to consider the significant changes that occurred in the market after the meetings of the Federal Reserve and the European Central Bank last week, so it is not worth paying special attention to it. Both central banks increased interest rates by 0.25%, keeping the market in balance and giving buyers of risky assets hope for future growth. There is no important data this week, so traders can exhale and relax a bit. The COT report states that 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 of the week, the total non-commercial net position increased to 173,489 compared to 144,956 a week earlier. The weekly closing price decreased to 1.1031 from 1.1039.
Indicator signals:
Moving averages
Trading is taking place below the 30 and 50-day moving averages, indicating a further decline in the pair.
Note: The author considers the period and prices of moving averages on an hourly H1 chart and differs from the general definition of classical daily moving averages on a daily D1 chart.
Bollinger Bands
In the case of growth, the upper boundary of the indicator at 1.0981 will act as resistance.
Description of indicators
• Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.
• Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages) Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-commercial traders - speculators, such as individual traders, hedge funds, and large institutions, using the futures market for speculative purposes and meeting certain requirements.
• Non-commercial long positions represent the total long open position of non-commercial traders.
• Non-commercial short positions represent the total short open position of non-commercial traders.
• The total non-commercial net position is the difference between the short and long positions of non-commercial traders.
