Yesterday, the pair formed several entry signals. Let's have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.0888 as a possible entry point. A decline and false breakout at this mark generated an excellent buy signal to continue the bullish trend. As a result, the pair grew by more than 30 pips. In the afternoon, safeguarding 1.0915 and a similar entry point made it possible for us to go back into the market to buy the euro, which sent the pair up by more than 80 pips. A breakout and consolidation above 1.0979 by the middle of the US session produced a buy signal, which sent the pair up by about 30 more pips.
For long positions on EUR/USD:
The Federal Reserve's pivot and the absence of the same signals from the European Central Bank boosted the euro yesterday, which strengthened the chances of building a new uptrend. Yesterday, the ECB left rates unchanged, having made it clear that it is not ready to trim them yet, even though inflation is actively returning to the target level of about 2.0%. This strengthened the bulls' position and the pair grew. Today, market participants will focus on the flash HCOB PMI report from France, Germany, and the Eurozone. The Eurozone HCOB Composite PMI preliminary reading is expected to show a slight increase. If the figures exceed economists' forecasts, the euro will continue to rise. If the data disappoints again, the pressure on the pair is likely to return, which I plan to take advantage of. It would be best to act in the development of a new uptrend, but the best scenario would be to act on a decline after a false breakout near 1.0979. This will confirm the entry point for long positions, targeting a recovery and test of the resistance at 1.1016. A breakout and a downward test of this range will produce a buy signal and a chance to develop a new uptrend with the prospect of testing 1.1058. The furthest target would be the 1.1103 area, where I plan to take profits. If EUR/USD declines and there is no activity at 1.0979 in the first half of the day, which is possible in case of very weak data, the currency pair may come under pressure at the end of the week. In such a case, it will be possible to enter the market after forming a false breakout near 1.0947. I will open long positions immediately on a rebound from 1.0915, bearing in mind an upward correction of 30-35 pips within the day.
For short positions on EUR/USD:
Sellers may be active in the area of the weekly high after weak eurozone data and an unsuccessful attempt to break through 1.1016. Forming a false breakout on this mark along with the persistence of divergence on the MACD indicator will generate a sell signal with the goal of testing the nearest support at 1.0979. Only after a breakout and consolidation below this range, which may take place during the release of weak data, as well as an upward retest, do I expect another sell signal at 1.0947. This is in line with the bullish moving averages. The lowest target will be the low of 1.0915, where I will take profits. In case of an upward movement of EUR/USD during the European session, as well as the absence of the bears at 1.1016, which is where things are headed, I will postpone selling the pair until the price tests the resistance at 1.1058. There, selling is also possible but only after a failed consolidation. I will open short positions immediately on a rebound from 1.1103 aiming for a downward correction of 30-35 pips.
COT report:
In the COT report (Commitment of Traders) for December 5, there was an increase in long positions and another significant decline in short positions. Obviously, the Federal Reserve's December meeting will be decisive for the dollar, and after the statements of policymakers it will become clear in what direction the central bank is ready to move. A soft stance on rates next year will reverse the market and the pair will rise. A tough stance, with strong inflation, will maintain the demand for the dollar for some time, but is unlikely to significantly affect the long-term balance of power in favor of buyers of risky assets. The COT report indicated that long non-commercial positions grew by 2,230 to 235,684, while short non-commercial positions decreased by 6,965 to 83,324. As a result, the spread between long and short positions increased by 8,165.
Indicator signals:
Moving averages:
Trading above the 30- and 50-day moving averages indicates a possible uptrend.
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 1.0915 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.
