In my morning forecast, I highlighted the level of 1.0800 and recommended making entry decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The rise and formation of a false breakout at 1.0800 provided a sell signal for the euro, but there was no significant downward movement. The technical picture remained largely unchanged in the second half of the day.
To open long positions on EUR/USD, the following is required:
Everyone awaits the US inflation figures, which will determine the market and the Federal Reserve's actions. If prices drop more than economists' expectations, the euro will have a chance to continue rising against the US dollar, as the central bank is likely to take the first pause in the interest rate hike cycle since 2021. If inflation remains high, we can expect renewed pressure on EUR/USD and a decline in the pair. In that case, I will act on the decline and the false breakout around the support level of 1.0767, formed based on yesterday's close and where the moving averages, favoring buyers, are located. This will provide an opportunity to enter long positions with the target of another rise towards the level of 1.0800. A breakthrough and top-down test of this range are necessary for buyers, as it will strengthen the demand for the euro, creating an additional entry point for increasing long positions with an update to the next level of 1.0830. The ultimate target remains around 1.0870, where I will take profits.
In the case of a decline in EUR/USD and the absence of buyers at 1.0767, the pressure on the euro will return. Therefore, only the formation of a false breakout around the next support level of 1.0734, the weekly low, will provide a signal to buy the euro. I will open long positions after a rebound from 1.0705, with a 30-35 point upward correction target within the day.
To open short positions on EUR/USD, the following is required:
Bears managed to defend the market around the resistance level of 1.0800, but there was no significant downward movement. The US inflation data will determine everything. However, considering the bullish market with selling pressure in the second half of the day, it is better to take your time. I will act only after another unsuccessful consolidation above the resistance level of 1.0800. A false breakout at this level will provide a sell signal capable of pushing the pair back to 1.0767, where the moving averages favoring bulls are located. Consolidation below this range and a reverse test from below to above will lead straight to 1.0734. The ultimate target will be around 1.0705, where I will take profits.
If EUR/USD moves upward during the American session and there are no bears at 1.0800, which is likely to be the case, the demand for the euro will only strengthen, potentially leading to a more powerful upward surge in the pair. In that case, I will postpone short positions until the new resistance level of 1.0830. Selling can be done there, but only after an unsuccessful consolidation. I will open short positions immediately on a rebound from the maximum of 1.0870, with a 30-35 point downward correction target.
The Commitment of Traders (COT) report for June 6 showed a decrease in long positions and a slight increase in short positions. Despite this, the Federal Reserve's decision on interest rates this week can significantly change the market dynamics, so paying much attention to the abovementioned changes may be optional. If the Fed decides to pause the rate hike cycle, the euro will gain significant weight, and the US dollar will weaken. Along with the European Central Bank's aggressive policy, despite the first signs of a slowdown in underlying inflationary pressure, all of this will lead to a continued rise in risk assets against the US dollar. According to the COT report, non-commercial long positions decreased by 5,757 to 236,060, while non-commercial short positions increased by 1,457 to 77,060. The overall non-commercial net position decreased to 158,224 from 163,054 by the end of the week. The weekly closing price decreased to 1.0702 from 1.0732.
Indicator signals:
Moving averages.
Trading occurs above the 30-day and 50-day moving averages, indicating a likelihood of the euro's rise.
Note: The author considers the period and prices of the moving averages on the hourly chart (H1), which differs from the general definition of classical daily moving averages on the daily chart (D1).
Bollinger Bands
In case of an upward movement, the upper boundary of the indicator around 1.0810 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) - Fast EMA period 12, Slow EMA period 26, SMA period 9.
• 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 specific requirements.
• Long non-commercial positions represent the total long open positions of non-commercial traders.
• Short non-commercial positions represent the total short open positions of non-commercial traders.
• The net non-commercial position is the difference between non-commercial traders' short and long positions.
