Yesterday, there were some signals to enter the market. Let's look at the 5-minute chart and figure out what happened. Previously, I considered entering the market from 1.0716. A breakout of this area and a downward test produced a sell signal, resulting in the pair's decline of 25 pips. In the second half of the day, traders protected the support level of 1.0672, and after the weekly low was updated, a buy signal emerged, resulting in a correction of 25 pips more.
For long positions on EUR/USD:
The lack of US data made it possible for the bulls to keep the pair from entering another big sell-off. Today, much will depend on the market's reaction to the upcoming German data, as well as speeches of the European Central Bank officials. In case we receive weak figures on the German industrial output, the euro will come under pressure again and the bulls will have to work hard to protect the nearest support level and at the same time, the lower limit of the sideways channel at 1.0669.
A false breakout there, along with hawkish statements from ECB Luis De Guindos and Fabio Panetta can push the pair to return to 1.0703, which is in line with the bearish moving averages, limiting the pair's upward potential. A breakout and a downward test of this level will facilitate demand for the euro, giving an additional entry point into long positions, and update the upper limit of the side channel at 1.0726. A more distant target will be 1.0750, where I recommend locking in profits. If bulls fail to defend 1.0669, the pressure on the pair may return. Therefore, only a false breakout of the support level of 1.0637 will give new entry points into long positions. You could buy EUR/USD at a bounce from the low of 1.0595, keeping in mind an upward intraday correction of 30-35 pips.
For short positions on EUR/USD:
Bears were doing well on Tuesday, and today, we can count on another weak report from Germany, showing that the country is slowly but surely sliding into a technical recession. But I won't be in a hurry to sell today. Bears need to protect the resistance level of 1.0800.
Considering that the eurozone will not issue data today, except Germany's report, we might see the euro's attempts at recovery. A false breakout of 1.0703 may provide a sell signal that could push the pair to the support level of 1.0669. Consolidation below this level as well as an upward test will trigger a decline to 1.0637. A more distant target will be the 1.0595 level where I recommend locking in profits. If EUR/USD rises during the European session and bears fail to protect 1.0703, there will be no serious market changes. But I would advise you to postpone short positions until a false breakout of 1.0726. You could sell EUR/USD at a bounce from 1.0750, keeping in mind a downward intraday correction of 30-35 pips.
COT report:
According to the COT report (Commitment of Traders) for May 30, there was a decline in long and short positions. However, a drop in long positions was bigger. It indicates falling demand for risk assets. Traders are unwilling to buy the euro due to fears of a slowdown in the European economy and a recession. What is more, the ECB sticks to aggressive monetary tightening even despite the first signs of a steady decline in inflation. Therefore, they prefer a wait-and-see approach. Meanwhile, the US labor remains resilient. Even if the Fed takes a pause in June, it is likely to keep raising rates, boosting demand for the US dollar. The COT report showed that long non-commercial positions decreased by 8,253 to 241,817, while short non-commercial positions fell by 242 to 76,092. At the end of the week, the total non-commercial net position amounted to 163,054 against 185,045. The weekly closing price slipped to 1.0732 against 1.0793.
Indicator signals:
Moving Averages
Trading is carried out below the 30 and 50-day moving averages, which shows that bears are trying to return to the market.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If the pair falls, the lower band of the indicator at 1.0669 will act as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• 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 represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.
