22.07.202108:43 ফরেক্স বিশ্লেষণ এবং পর্যালোচনা: EUR/USD: plan for the European session on July 22. COT reports. ECB meeting will lead to a serious surge in volatility

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

Yesterday, the euro bulls managed to declare themselves, and as the bears did not try to reverse the correction, they did not succeed. Let's take a look at the 5-minute chart and break down the entry points.. In the first half of the day, after the bears failed to settle below the support at 1.1757, the bulls quickly regained control of the market, forming a false breakout there, which created a signal to open long positions in hopes of a recovery to the resistance of 1.1779. The upward movement brought about 20 points - almost all intraday volatility. Even before the beginning of the US trading session, a false breakout formed at the level of 1.1779, which resulted in creating a signal to sell the euro and the pair to fall by 15 points. A breakthrough of 1.1779 occurred in the afternoon without a reverse test, so there was no buy signal. And the bears formed a false breakout in the area of the next resistance at 1.1801 only in the middle of the US session, but there was no major downward movement from this level.

Exchange Rates 22.07.2021 analysis

Today, traders will focus on the European Central Bank meeting and its decision on monetary policy, which may become decisive for the medium-term direction of the pair. The ECB may change its attitude to inflation and accordingly revise the date of the first increase in interest rates at a later date, which will put pressure on the euro. As for the first half of the day, euro bulls will focus on the level of 1.1804. Only a breakthrough and consolidation at this range, followed by its test from top to bottom, can create a signal to open long positions in continuation of the upward correction, counting on the growth to the upper border of the horizontal channel at 1.1825. Going beyond this range will create a more powerful bullish momentum, which will open a direct road to the highs of 1.1849 and 1.1874, where I recommend taking profits. However, such a powerful movement will be only possible if ECB President Christine Lagarde says that plans to curtail support for the economy will remain in effect, which is unlikely. In case EUR/USD falls during the European session, the bulls need to think about how to protect the support of 1.1783, where the moving averages are playing on their side. Considering that there are no fundamental reports today, it will be quite difficult to do this. Forming a false breakout there will help the bulls in sustaining the pair's growth in the short term. In case the bulls are not active at 1.1783, I advise you to postpone long positions and wait for the next local low in the 1.1763 area to update, or buy the pair immediately on a rebound from the next major support at 1.1740, counting on an upward correction of 15-20 points within the day.

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

The bears are gradually losing control of the market ahead of the ECB meeting. And although trading is carried out in a horizontal channel, any exit beyond 1.1804 can be costly for bears. Forming a false breakout at the level of 1.1804 generates a signal to open short positions in hopes of continuing the bearish trend formed at the beginning of this week. An important target will be the support at 1.1783, which is a kind of middle of the channel. Whether the pair remains under the control of the bears or not will depend on a breakthrough. Consolidating below this range and testing it from the bottom up will create a good signal to open short positions in hopes that the pair would fall to a low like 1.1763. The next target will be the area of 1.1740, where I recommend taking profits. In case EUR/USD grows during the European session and the bulls are not active at 1.1804, it is best to postpone selling until the test of the larger resistance at 1.1825. Selling the pair immediately on a rebound counting on a downward correction of 15-20 points is also possible from a high like 1.1849. Remember that a major market movement will be generated immediately after the ECB announces its decision on monetary policy and during Lagarde's press conference. The euro's direction will depend on what European politicians say and will.

Exchange Rates 22.07.2021 analysis

The Commitment of Traders (COT) report for July 13 clearly showed a skew in the market towards sellers of risky assets. And although the long positions have not changed in any way, the sharp growth in short positions has caused the overall positive net position to fall. The fact that US inflation continues to grow and not only Federal Reserve Chairman Jerome Powell, but also US President Joe Biden, speaks about it, indicates the seriousness of the situation. And no matter how the central bank tries to convince investors that this is just a temporary phenomenon, the market continues to abandon risky assets in favor of safe haven assets, which is the US dollar. This week, the picture can only get worse, as the European Central Bank will hold a meeting on Thursday. At it, politicians will announce a new mandate regarding the long-term rate of inflation in the eurozone, which may lead to a revision of plans for monetary policy in the near future. This will be a certain shock for the euro and it is difficult to guess what the market reaction will be. But the lower the euro falls, the higher the demand for it will be in the medium term, since the appeal of risky assets has not gone away. The COT report indicates that long non-commercial positions remained virtually unchanged and decreased from the level of 212,998 to the level of 212,851, while short non-commercial positions increased from the level of 135,808 to the level of 153,138. In addition to the ECB's decision on Friday, we are waiting for interesting fundamental reports on the activity of the service sector and the manufacturing sector of the eurozone countries, which can definitely affect the euro's direction in the short term. The total non-commercial net position decreased from the level of 77,190 to the level of 59,713. The weekly closing price remained unchanged at 1.1862.

Indicator signals:

Trading is carried out just above the 30 and 50 moving averages, which indicates an attempt by the bulls to seize control of the market.

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

A breakthrough of the upper border of the indicator in the area of 1.1810 will lead to a new wave of euro growth. Surpassing the lower border of the indicator in the area of 1.1770 will increase the pressure on the pair.

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.

*এখানে পোস্ট করা মার্কেট বিশ্লেষণ আপনার সচেতনতা বৃদ্ধির জন্য প্রদান করা হয়, ট্রেড করার নির্দেশনা প্রদানের জন্য প্রদান করা হয় না।

Miroslaw Bawulski,
ইন্সটাফরেক্সের বিশ্লেষণ বিশেষজ্ঞ
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