On Friday, one entry signal was created. Let's turn to the M5 chart to get a picture of what happened. Previously, I considered entering the market from 1.0757. Growth and a false breakout created a sell entry point, which resulted in a fall of over 40 pips.
When to open long positions on EUR/USD:
On Friday, the pair tumbled amid an increase in personal spending and personal income in the US. Those figures indicated that inflation in the country was still high. So, the Fed might keep hiking interest rates. Today, the macroeconomic calendar will be empty. Therefore, both trading volumes and volatility will likely be at a low level. After a fall and a false breakout through a new monthly low of 1.0704, I will open long positions, targeting 1.0755 resistance. A deal on the debt ceiling in the US has been reached. So, we may see a bullish correction today. Demand for the euro will likely increase after a breakout and a downside test of the 1.0755 mark by the second half of the day. In such a case, I will open long positions with the target at 1.0795. The most distant target is still seen at 1.0833, where I will lock in profit.
If EUR/USD goes down and there is no bullish activity at 1.0704, which is highly unlikely following the US debt limit news, the current trend will extend. A false breakout through 1.0670 support will make a buy signal. I will buy EUR/USD from a low of 1.0634 on a rebound, allowing a correction of 30-35 pips intraday.
When to open short positions on EUR/USD:
The bears are still in control over the market. An increase in selling volumes will take place if they manage to protect 1.0755 resistance. A false breakout through this level will generate a signal to sell the asset with the target at a monthly low of 1.0704. In case of a breakout below the target and its upside test, the price may go to 1.0670. The most distant target is seen at a low of 1.0634, where I will lock in profits. If EUR/USD goes up in the European session and there is no bearish activity at 1.0755, a correction may occur. I will open short positions at 1.0795 after failed consolidation and on a bounce from a high of 1.0833, allowing a bearish correction of 30-35 pips.
Commitments of Traders
The COT report for May 16 logged a decrease in long and short positions. In light of a bearish correction, we may open more long positions. However, demand for risk assets will grow only when the debt ceiling issue is resolved. Traders even ignore statements of Fed officials who say the regulator will pause hiking rates at the next meeting, which is a clear bull signal. So, once the issue is settled, buyers will return to the market. According to the COT report, non-commercial long positions dropped by 1,599 to 258,736, and non-commercial short positions decreased by 9,266 to 71,647. The overall non-commercial net position rose to 187,089 from 179,422. The weekly closing price fell to 1.0889 from 1.0992.
Indicator signals:
Moving averages:
Trading is carried out in the area of the 30-day and 50-day moving averages, which indicates the likelihood of a bullish correction.
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
Support stands at 1.0704, in line with the lower band.
Indicator description:
- Moving average (MA) determines the current trend by smoothing volatility and noise. Period 50. Colored yellow on the chart.
- Moving average (MA) determines the current trend by smoothing volatility and noise. Period 30. Colored green on the chart.
- Moving Average Convergence/Divergence (MACD). Fast EMA 12. Slow EMA 26. SMA 9.
- Bollinger Bands. Period 20
- Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions are the total long position of non-commercial traders.
- Non-commercial short positions are the total short position of non-commercial traders.
- Total non-commercial net position is the difference between short and long positions of non-commercial traders.
