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28.10.202108:47 Forex Analysis & Reviews: EUR/USD: plan for the European session on October 28. COT reports. The ECB meeting will determine the euro's direction. Euro stays in the channel

To open long positions on EUR/USD, you need:

Yesterday was quite an interesting day for trading. Let's take a look at the 5 minute chart and understand the trades. In the first half of the day, several signals to enter the market were formed at once. Updates to the 1.1612 level, which I paid attention to in my forecast, resulted in forming a false breakout and creating a good entry point for short positions. As a result, one could observe a decline to the support area of 1.1590. After some time, the formation of a false breakout in the 1.1590 area created an excellent buy signal, which caused the euro to rise and consolidation above the resistance at 1.1612. The overall upward movement was more than 35 points. In the second half of the day, the test of 1.1612 from top to bottom created an entry point into long positions in continuation of the growth, but they did not come to a realization. The bears regained control over 1.1612 and a bottom-up update of this level forced us to close long positions and open short ones. As a result, the bears achieved a retest of the support at 1.1588.

Exchange Rates 28.10.2021 analysis

Today we have a very important day, as it will determine the direction of the EUR/USD pair's movement. Most likely, the data on the unemployment rate in Germany will not be of much help to the bulls, even in case of good reports, since everyone will shift their attention to the European Central Bank's decision on the main interest rate. What ECB President Christine Lagarde will tell us can determine the further direction of the pair. If there are hints of policy tightening in an earlier period, the bulls will clearly focus on the breakthrough of the 1.1622 resistance, which has been preventing euro bulls from resuming the euro upward trend for several days. The breakthrough and test of this level from top to bottom creates an excellent entry point into long positions, which will open the way to 1.1649 and 1.1668, where I recommend taking profits. The next target will be the level of 1.1691, but it will be available on condition that the ECB starts talking seriously about inflationary risks. If Lagarde continues to adhere to a super-soft monetary policy, it is unlikely to do much harm to the euro, but could create additional intraday pressure on the pair. In case EUR/USD falls in the first half of the day, an equally important task of the bulls is to protect the lower boundary of the 1.1591 channel. Forming a false breakout there creates a good entry point into long positions. If the bulls are not active at this level, I advise you to postpone long positions to the area of 1.1568. It is best to buy the pair immediately on a rebound from the low like 1.1542, counting on a correction of 15-20 points within the day.

To open short positions on EUR/USD, you need:

Euro bears have quite simple tasks - to defend 1.1622 and break the support at 1.1591. Forming a false breakout at the level of 1.1622, together with weak data on the labor market and inflation in Germany, will return the real pressure on EUR/USD. However, only a dovish rhetoric from Lagarde can lead to a test of the lower boundary of the horizontal channel at 1.1591. A breakthrough of this level and renewal from the bottom up can create another signal to open new short positions, followed by a fall to the 1.1568 area. A breakthrough of this range will also lead to the demolition of bulls' stop orders located below - this will quickly bring EUR/USD to 1.1542 and open a direct path to 1.1510, where I recommend taking profits. In case the pair rises in the morning and the bears are not active at the level of 1.1622, it is best to postpone selling until the test of the high of 1.1649. It is possible to open short positions immediately on a rebound, counting on a downward correction of 15-20 points from a large resistance at 1.1668.

Exchange Rates 28.10.2021 analysis

I recommend for review:

The Commitment of Traders (COT) report for October 19 revealed that both short and long positions declined, which led to a slight recovery in the negative delta, as more bears than bulls left the market than. Inflation in the eurozone came out last week, which rose and coincided with economists' expectations. This has forced many representatives of the European Central Bank to revisit the topic of changes in monetary policy. However, the fact that virtually everyone stuck to a wait-and-see attitude and retained stimulus measures in the form of bond purchases after the end of the PEPP program in March next year put some pressure on the European currency. The slowdown in manufacturing and services in the eurozone also prevented euro bulls from getting beyond the 17th figure. However, a key problem in the short term, negatively affecting the euro's growth, is the sharp spread of the fourth wave of coronavirus infection throughout the European Union. In the United States of America, the strong recovery in the economy continues to support the greenback. The fact that the Federal Reserve is already seriously considering curtailing the bond purchase program at its next meeting in November will also limit the euro's upside potential against the US dollar. The COT report indicated that long non-commercial positions fell from 202,512 to 193,320, while short non-commercial positions fell from 220,910 to 205,427 against -18 398. The weekly closing price rose to the level of 1.1613 against 1.1553.

Indicator signals:

Trading is carried out in the area of 30 and 50 day moving averages, which indicates the sideways nature of the market in front of important data.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

In case of growth, the upper border of the indicator in the area of 1.1620 will act as a resistance. The lower border of the indicator around 1.1590 will act as a support.

Description of indicators

  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in 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 short and long positions of non-commercial traders.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Miroslaw Bawulski,
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