In the morning article, I turned your attention to the level of 1.0525 and recommended making decisions on market entry with this level in focus. Now let's take a look at the 5-minute chart and try to figure out what actually happened. The price growth and a false breakout at 1.0525 created excellent conditions for increasing short positions. The euro dropped by more than 35 pips. However, it failed to approach the support level of 1.0486. For the afternoon, the technical outlook was slightly revised.
When to open long positions on EUR/USD:
Today, the economic calendar is almost empty. The US will unveil its initial jobless claims report. Apart from that, Christine Lagarde will deliver a speech. If the tone of her comments is hawkish, the euro could recover to yesterday's high. However, it will be quite hard for the euro to consolidate above this level. I would advise you to open long positions only after a drop and a breakout of 1.0494. It will provide a buying opportunity. The pair may advance to 1.0546, which is the pivot level for the bulls today. It also coincides with yesterday's high. A breakout and a downward retest of this level will boost the bullish trend, opening the way to this monthly high of 1.0591. If the price breaks above this level, we could bet on a rapid upward movement to a high of 1.0640 where I recommend locking in profits. If EUR/USD declines during the US session and bulls show no activity at 1.0494, the pressure on the euro will increase again. Bulls will have to close Stop Loss orders. In this case, only a false breakout of the support level of 1.0446 which is yesterday's low, will be a reason to open long positions. You could buy EUR/USD immediately at a bounce from 1.0395 or lower at 1.0346, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
After pushing the euro to the intraday low, sellers tried to cement their success. The pair dropped significantly but failed to hit the support level. Thus, buyers regained the upper hand. Now, the main task of the bears is to take control of the 1.0494 level. They were unable to do so in the morning. They also need to protect the resistance level of 1.0546. A false breakout of this level may take place during the release of US data. It could give an entry point into short positions with the prospect of a drop to the support level of 1.0494. The moving averages are benefiting bulls at this level. A breakout below this level and an upward retest will provide an additional sell signal. If so, bulls will be forced to close Stop Loss orders. The euro is likely to dip to 1.0446 where I recommend locking in profits. A more distant target will be the 1.0395 level. If EUR/USD rises during the US session and bears show no energy at 1.0546, sellers will have to leave the market. Buyers will get a chance to push the pair to the monthly high and 1.0591. It is recommended to open short positions from this level only if a false breakout takes place. You could sell EUR/USD immediately at a bounce from a high of 1.0640, keeping in mind a downward intraday correction of 30-35 pips.
According to the COT report from November 29, the number of both long and short positions increased. Announcements made by Jerome Powell last week retained demand for risk assets, including the euro. Since the pair has been confidently rising since November, there are a lot of traders who prefer selling at the current levels. Recent fundamental data from the US, namely, business activity and labor market indicators, allowed traders to bet on a longer period of higher interest rates in the US in the upcoming year. Against the backdrop, there is no good reason to open long positions in the midterm. The higher the euro climbs, the deeper it will fall. The week is expected to be calm and traders are likely to shift their attention to the FOMC meeting, which is scheduled for December 13-14. According to the COT report, the number of long non-commercial positions increased by 1,524 to 241,122, whereas the number of short non-commercial positions jumped by 2,389 to 118,875. At the end of the week, the total non-commercial net position decreased slightly to 122,234 from 123,112. This indicates that investors are no longer in such a hurry to buy back the euro since it is not as cheap as it was a few months earlier. The weekly closing price advanced to 1.0342 from 1.0315.
Signals of technical indicators
EUR/USD is trading near 30- and 50-period moving averages. It indicates that investors are hesitant to pick a further trajectory.
Remark. The author is analyzing the period and prices of moving averages on the 1-hour chart. So, it differs from the common definition of classic daily moving averages on the daily chart.
If EUR/USD moves down, the indicator's lower border at 1.0494 will serve as support.
Definitions of technical indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.