Several suitable entry points into the market were formed yesterday. Let's take a look at the 5-minute chart and analyze what happened. In my morning forecast, I focused on the 1.1584 level and planned to base my trading decisions on it. A decline and the formation of a false breakout around 1.1584 provided an entry point for buying euros, but after a 10-pip rise, demand quickly waned. In the second half of the day, an unsuccessful attempt to break above 1.1584 led to euro selling, resulting in a decline of more than 40 pips.
Long Positions for EUR/USD
The euro has lost ground and dropped below the lower boundary of the sideways channel it had occupied all week. The decline occurred after it became evident that many Federal Reserve officials believe it is appropriate to keep interest rates unchanged until the end of 2025. Today, pressure on the pair may only increase. We are looking ahead to the Producer Price Index data for Germany, the monthly Bundesbank report, and the Eurozone Consumer Confidence Indicator. Weak indicators will trigger a new wave of selling for EUR/USD, which I intend to take advantage of. I expect the first signs of buyers only around support at 1.1494. A false breakout at that level will provide an entry point for long positions targeting a recovery toward resistance at 1.1521, below which trading is currently taking place. A breakout and reverse test of this range will confirm the correct action for buying euros, anticipating a larger surge toward 1.1541. The furthest target will be last week's high at 1.1564, where I will take profits. If EUR/USD continues to decline and there is no activity at 1.1494, pressure on the pair will increase, potentially leading to a larger sell-off. Sellers will likely reach the next interesting level at 1.1472. Only the formation of a false breakout there will provide a suitable condition for buying euros. Long positions may also be opened on a rebound from 1.1433, targeting an intraday upward correction of 30-35 pips.
Short Positions for EUR/USD
Sellers continue to exert pressure on the euro, and a breakout from the sideways channel has only intensified the pressure on the pair. If the euro rises after the Eurozone data, the initial task for bears will be to defend the 1.1521 resistance level. A false breakout at that level will provide an entry point for short positions targeting a move to support at 1.1494. A breakout and consolidation below this range, alongside a reverse test from bottom to top, will provide another suitable option for opening short positions toward the 1.1472 area, reinforcing the bearish trend. The farthest target will be the 1.1433 area, where I will take profits. In the case of an upward move in EUR/USD without active bearish action around 1.1521, it is best to postpone short positions until a larger level at 1.1541. Selling will only occur after a failed consolidation there. I plan to open short positions on a rebound from 1.1564, targeting a 30-35-pip downward correction.
Recommended for Review
Due to the U.S. government shutdown, fresh Commitment of Traders (COT) data is not being published; the latest available data is from September 23. The COT report indicated an increase in short positions and a decrease in long positions. Expectations of further rate cuts by the Federal Reserve continue to exert pressure on the U.S. dollar. However, the number of euro buyers has not increased, as political issues in France and risks of a new inflation surge compel the European Central Bank to act more cautiously, slowing economic growth. In the COT report, non-commercial long positions decreased by 789 to 252,472, while short positions increased by 2,625 to 138,625. Consequently, the spread between long and short positions decreased by 873.
Indicator Signals
Moving Averages: Trading is below the 30 and 50-day moving averages, indicating further declines for the pair.
Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of classical daily moving averages on the daily chart D1.
Bollinger Bands: In the event of a decline, support will come from the indicator's lower boundary around 1.1500.
Description of Indicators:
- Moving Average (MA): Determines the current trend by smoothing out volatility and noise. Period – 50. Highlighted in yellow on the chart.
- Moving Average (MA): Determines the current trend by smoothing out volatility and noise. Period – 30. Highlighted in green on the chart.
- MACD Indicator (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 individual traders, hedge funds, and large institutions that use the futures market for speculative purposes, meeting certain requirements.
- Long Non-commercial Positions: The total long open position of non-commercial traders.
- Short Non-commercial Positions: The total short open position of non-commercial traders.
- Total Non-commercial Net Position: The difference between the short and long positions of non-commercial traders.
