In my morning article, I turned your attention to 1.0932 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and figure out what actually happened. A decline and a false breakout there, and I did not wait for the pip-to-pip level test in such a bull market, gave a buy signal. As a result, the euro maintained its uptrend. However, the released inflation data limited the pair's upside potential. It brought only about 20 pips of profit. For the afternoon, the technical outlook has remained unchanged.
When to open long positions on EUR/USD:
Inflation in the eurozone was in line with forecasts. The reading declined although the CPI which the ECB gauges when taking rate decisions is still quite high. It indicates that the ECB's aggressive monetary policy is efficient. The ECB hinted at new rate hikes in the summer. In the afternoon, the pressure on the euro may return in case of strong data on the US Consumer Sentiment Index and high inflation expectations from the University of Michigan. If Christopher Wallace makes hawkish comments, it may also lead to a downward correction of the pair.
Despite all this, the technical outlook remains bullish. I will trade based on the morning forecast. It is better to open long positions only at the support level of 1.0932, which has already been tested today. Only a false breakout there, similar to the one I have mentioned above, will give a buy signal. The pair may jump to a high of 1.0976. A breakout and a downward retest of this level will bolster demand for the euro. Thus, the pair is likely to approach the resistance level of 1.1002. A more distant target will be the 1.10289 level where I recommend locking in profits.
If EUR/USD rises and bulls fail to protect 1.0932, which is likely as bears may begin to act more actively in the afternoon. Therefore, a false breakout of the support level of 1.0898 could create new entry points into long positions. You could buy EUR/USD at a bounce from a low of 1.0862, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Bears have a small chance to regain control. I would prefer to act only on growth and a false breakout of the resistance level of 1.0976. The pair may decline to this level in case of weak US macro stats. An unsuccessful consolidation there could create a sell signal, pushing EUR/USD back to 1.0932 - the support level tested today during European trading. The consolidation below this level as well as an upward retest will trigger a drop to 1.0898 where the moving averages are passing in positive territory. A more distant target will be the 1.0862 level I recommend locking in profits.
If EUR/USD rises during the US session and bears fail to defend 1.0976, a bullish trend will continue. In this case, I will postpone short positions until a false breakout of the resistance level of 1.1002. You could sell at a bounce from 1.1029, keeping in mind a downward intraday correction of 30-35 pips.
COT report
According to the COT report (Commitment of Traders) for June 6, there was a drop in long positions and a slight increase in short ones. Despite all this, the Fed's rate decision this week may significantly affect market sentiment. Hence, the above-mentioned changes are not important. If the Fed decides to skip a rate increase, the euro will climb markedly. Risk appetite will improve amid the ECB's commitment to a hawkish stance even despite the first signs of a slowdown in inflationary pressure. The COT report showed that long non-commercial positions decreased by 5,757, to 236,060, while short non-commercial positions rose by 1,457, to 77,060. At the end of the week, the total non-commercial net position declined and amounted to 158,224 against 163,054. The weekly closing price dropped to 1.0702 against 1.0732.
Indicators' signals:
Trading is carried out above the 30 and 50 daily moving averages, which indicates the likelihood of a further upward movement.
Moving averages
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
If EUR/USD moves up, the indicator's upper border at 1.0950 will serve as resistance.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked green on the chart.
- MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions represent the total long open position of non-commercial traders.
- Short non-commercial positions represent the total short open position of non-commercial traders.
- Total non-commercial net position is the difference between the short and long positions of non-commercial traders.
