Yesterday, there was only one entry signal. Let's look at the 5-minute chart to get a picture of what happened. Previously, I considered entering the market from the level of 1.0795. Growth and a false breakout through 1.0795 generated a sell signal, but a significant downward movement did not occur. In the second half of the day, there were no entry points
For long positions on EUR/USD:
The euro reacted strongly to news that the Federal Reserve decided on a pause after 15 months of rate hikes, but the central bank made it clear that at some point they would resume tightening to get inflation down to the right level. During the speech, Fed Chairman Jerome Powell said that at least a few more rate hikes are expected this year. That was quite a "cold shower" for the euro buyers, who were counting on extending the rally today, once the European Central Bank raises its rates. This morning, we have the ECB decisions on the main interest rate, the deposit rate and the monetary policy report. All of this could definitely help the euro to return to monthly highs.
But I will be cautious at the current levels. I will act around the support level of 1.0777, which was formed following yesterday's results. If ECB President Christine Lagarde mentions problems in the economy, the euro will be under significant pressure, even after the interest rate hike. I will open long positions only after a false breakout through the mark, anticipating growth towards resistance at 1.0822, which is in line with the bearish moving averages. A breakout and a downside test of this range will strengthen demand, maintaining its chance to rise to 1.0862, a new resistance. The ultimate target remains in the area of 1.0903, where I will take profits.
In the case of EUR/USD decline and the absence of buyers at 1.0777, which is more likely after the Fed's decision, but this will likely happen in the afternoon, the pair come under pressure. Therefore, only the formation of a false breakout of the next support level of 1.0734 would provide a buy signal for the euro. I will open long positions immediately if EUR/USD bounces off the low at 1.0705, targeting an upward intraday correction of 30-35 pips.
For short positions on EUR/USD:
Bears were doing quite well after the Fed's decision and subsequent statements that the officials made after that, but we can hardly count on the bears to be active in the future, because we have the ECB meeting ahead, where the rates will be raised for sure. That is why I will only act on a false breakout at the intermediate resistance 1.0822, which is in line with the bearish moving averages. A failed consolidation on this mark will produce a sell signal that could push the EUR/USD back to 1.0777, a support level that plays an important role in the pair's daily direction. In case of consolidation below this range, as well as an upside retest, the pair will head toward 1.0734. The most distant target is seen at a low of 1.0705, where I will take profit.
In case EUR/USD moves up during the European session and there are no bears at 1.0822, bullish sentiment will improve, as the bulls probably plan to take advantage of the ECB's decision. In that case, I will postpone going short on the pair until it reaches the next resistance level of 1.0863. New short positions can also be opened there, but only after a failed consolidation. I will open short positions immediately if EUR/USD bounces off the high of 1.0903, targeting a downward correction of 30-35 pips.
COT report:
The COT report for June 6 revealed a fall in long positions and a slight increase in short positions. The decision of the Federal Reserve on interest rates this week can significantly change the situation in the market. If the Federal Reserve decides to pause hiking rates, the euro will gain significantly while the US dollar will weaken. With an aggressive European Central Bank and despite the signs of a slowdown in underlying inflationary pressures, risk assets will likely continue strengthening 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 dropped to 158,224 from 163,054. The weekly closing price fell to 1.0702 from 1.0732.
Indicator signals:
Moving Averages
Trading is carried out below the 30 and 50-day moving averages, which indicates bearish attempts 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 1.0800 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.
