Yesterday, the pair formed some great entry signals. Let's have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.0978 as a possible entry point. The decline and a false breakout at this mark generated a buy signal, but after rising by 15 pips, the pressure on the pair returned, and the pair moved back to the area of 1.0978. In the second half of the day, safeguarding resistance at 1.0989 produced a sell signal, which sent the euro down to the area of 1.0960. Buyers being active at this level with a false breakout produced a buy signal and the pair returned to the area of 1.0989.
For long positions on EUR/USD:
The upward revision on the growth in US Q3-2023 GDP brought back demand for the dollar and exerted pressure on the euro on Wednesday afternoon. Today, the eurozone will release a number of reports, which can exert pressure on the bulls. You should pay attention to the eurozone Consumer Price Index, as well as the unemployment rate. A decrease in inflation and increase in unemployment is a direct signal to sell the euro and sign of a bearish correction. In addition, let's see how European Central Bank President Christine Lagarde, who recently said that rates should be kept at current levels for as long as possible, will comment on the situation. If the eurozone data shows that inflation has dropped, the pair is likely to fall to the support area of 1.0962, where I plan to act. A decline and a false breakout on this mark will generate a buy signal in anticipation of growth and a test of the new resistance at 1.0992, established yesterday. A breakout and update from top to bottom of this area will depend on Lagarde's statements, and this may produce another buy signal, paving the way to 1.1017. The highest target will be the area of 1.1058, where I will take profits. In the scenario of a decrease in EUR/USD and the absence of activity at 1.0962 in the first half of the day, the instrument will continue to trade sideways. In such a case, it will be possible to enter the market after forming a false breakout near 1.0929. I will open long positions immediately on a rebound from 1.0896, bearing in mind an upward correction of 30-35 pips within the day.
For short positions on EUR/USD:
Yesterday, sellers got their way and were in control of the market within the current bearish correction. Today, it is necessary to stay below 1.0992, as this scenario will help to maintain the pressure on the euro. A false breakout at this mark after the news about the decline in eurozone inflation will generate an excellent sell signal in anticipation of another downward correction and a test of the support at 1.0962. Above this level, we have the moving averages that favor the bulls. Only a breakout and consolidation below this range, as well as an upward retest, will lead to another sell signal at 1.0929. The lowest target will be the low of 1.0896, where I will take profits. Testing this level could significantly impact the future prospects of the buyers. In case of an upward movement of EUR/USD during the European session, amid tough statements from Lagarde, and in the absence of the bears at 1.0992, the bullish market will develop further. This will open the way for the buyers to the high of 1.1017. There, selling is also possible but only after a failed consolidation. I will open short positions immediately on a rebound from 1.1058 aiming for a downward correction of 30-35 pips.
COT report:
In the COT report (Commitment of Traders) for November 21, there was an increase in long positions and another significant decline in short positions. Statements by ECB policymakers and their commitment to high interest rates encouraged traders to add long positions on EUR/USD last week. Besides, a series of PMI reports also demonstrated a slight recovery in some eurozone countries, leaving a chance to avoid a recession in Q4 of this year. The minutes of the Federal Reserve's November meeting slightly dampened the zeal of the buyers of risky assets but did not particularly affect the development of the bullish trend. Soon, a lot of important fundamental statistics on inflation and consumer confidence will be released, which will definitely affect the market direction. The COT report indicated that long non-commercial positions grew by 9,905 to 231,095, while short non-commercial positions decreased by 10,842 to 101,441. As a result, the spread between long and short positions increased by 1,170. EUR/USD closed on Friday higher at 1.0927 compared to 1.0902 a week ago.
Indicator signals:
Moving averages:
Trading just around the 30- and 50-day moving averages indicates sideways movement.
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 EUR/USD declines, the indicator's lower border near 1.0962 will serve 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.
