In my morning forecast, I highlighted the level of 1.0631 and planned to base market entry decisions around it. Let's look at the 5-minute chart to analyze what happened. A decline and the subsequent formation of a false breakout at this level allowed for an entry into long positions, but the upward correction never materialized. Shortly after, the breakout and retest of 1.0631 led to a sell signal for the euro, resulting in a downward movement of about 20 points. The technical outlook for the second half of the day remains unchanged.
To Open Long Positions on EUR/USD:
Weak business sentiment data from Germany and the Eurozone, significantly worse than economists' forecasts, triggered another euro sell-off after bulls failed to defend the monthly low. Although there are no major statistics scheduled for the second half of the day, several speeches by Federal Reserve representatives are planned. Policymakers' statements could provide additional support to the dollar and exert further pressure on the euro.
Thus, I won't rush to buy. In the event of a decline, only the formation of a false breakout around the new support at 1.0601, akin to the scenario described earlier, will create a suitable condition for opening long positions in anticipation of a correction. This could pave the way to the 1.0631 level, which served as resistance in the morning. A breakout and retest of this range would confirm the correct entry point for buying, with the target set at 1.0661. The ultimate target would be the 1.0690 level, where I plan to take profits.
If EUR/USD continues its downward movement and no activity is observed around 1.0601 in the second half of the day, the euro is likely to maintain its bearish trend. In this case, I'll consider entering long positions only after a false breakout forms around the next support level at 1.0569. Alternatively, I plan to open long positions on a rebound from 1.0545, targeting an intraday upward correction of 30-35 points.
To Open Short Positions on EUR/USD:
If the pair rises, sellers will aim to defend the resistance at 1.0631. The formation of a false breakout at this level, similar to the scenario described earlier, will provide an entry point for short positions, targeting support at 1.0601.
A breakout and consolidation below this range, followed by a retest from the bottom up, would provide another valid selling opportunity. This move could target the weekly low at 1.0569, further reinforcing the bearish trend. The ultimate target would be the 1.0545 level, where I plan to take profits.
If EUR/USD rises during the second half of the day following statements from Federal Reserve representatives about further rate cuts, and bears fail to defend 1.0631 (an unlikely scenario), buyers will have a chance to build a correction. In this case, I'll postpone selling until testing the next resistance at 1.0661, where the moving averages favor sellers. I'll also consider selling at this level but only after a failed consolidation attempt. Alternatively, I plan to open short positions on a rebound from 1.0690, targeting a downward correction of 30-35 points.
Key Points from the Commitment of Traders (COT) Report:
The COT report for November 5 indicated a slight increase in long positions and a sharp reduction in short ones. However, the data does not account for the results of the U.S. presidential elections or the Federal Reserve's rate cuts. As such, the report is less relevant under current market conditions. Given recent developments, risk assets are likely to remain under pressure, while the U.S. dollar is expected to maintain strong demand.
The COT report shows that long non-commercial positions increased by 587, reaching 159,900, while short non-commercial positions decreased by 28,064 to 181,553. The net position gap increased by 1,193.
Indicator Signals:
Moving Averages:
The pair trades below the 30-day and 50-day moving averages, signaling further declines.
Bollinger Bands:
In case of a decline, the lower band of the indicator around 1.0630 will act as support.
Indicator Descriptions:
- Moving Average (MA): Determines the current trend by smoothing volatility and noise.
- Period: 50 (yellow line on the chart)
- Period: 30 (green line on the chart)
- MACD: 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 retail traders, hedge funds, and large institutions using the futures market for speculative purposes.
- Long non-commercial positions: Total long positions held by non-commercial traders.
- Short non-commercial positions: Total short positions held by non-commercial traders.
- Net non-commercial position: Difference between short and long positions of non-commercial traders.
