To open long positions on EUR/USD, you need:
Yesterday there were several signals to enter the market, but it was quite difficult to trade them. Despite the fact that the upward trend has persisted for the euro, it has not yet been possible to go beyond the monthly highs. In the first half of the day, after a breakthrough and consolidation above the resistance of 1.2149, the bears tried to regain control of the market, but it did not work out very well, after which a signal to buy the euro had appeared during the continuation of Friday's upward trend. However, at best, it would have been possible to enter the market at a price of 1.2155, and when the pair reached 1.2170, +15 points was not necessarily a good result. Whoever missed this entry point did not lose much. After a downward correction and a false breakout at the level of 1.2135 in the afternoon, a signal to open long positions had also appeared. I paid attention to it in my afternoon forecast. As a result, the upward movement was about 30 points.
Before talking about further prospects for the EUR/USD movement, let's see what happened in the futures market and how the Commitment of Traders (COT) positions have changed. The COT report for May 11 revealed that both short and long positions have increased, but this time there were more buyers, which caused the overall non-commercial position to rise. Last week, everyone was waiting for the US inflation report, which set the tone. Its sharp rise only provided temporary support to the US dollar, but traders managed to take advantage of this moment to open long positions after the EUR/USD pair corrected downward. Apparently, news that the Federal Reserve is going to raise interest rates is the only thing that can push the dollar to significantly rise. Until then can the demand for risky assets prevail, which will help the euro in the short term and further renew its monthly highs. The COT report indicated that long non-commercial positions jumped from 206,472 to 223,387, while short non-commercial positions rose from 121,643 to 129,480. This indicates an influx of new buyers that expect the euro's growth, however with each renewal of the highs, there are more and more people willing to sell. The total non-commercial net position rose from 84,829 to 93,907. The weekly closing price also increased significantly from 1.20591 to 1.21406.
As for the current technical picture, much of today will depend on the fundamental data on the European economy. The report on the unemployment rate and GDP of the eurozone will be released today. In case the euro falls after these indicators are published, the bulls will have to defend a new support at 1.2141, where the moving averages are located, playing on the side of the bulls. Forming a false breakout there will be a signal to open long positions in continuation of the upward trend that was formed at the end of last week. On the contrary, good reports will help the bulls return the pair to the month's high in the area of 1.2179. Only a breakthrough and consolidation above this range with a reverse test from top to bottom can create a signal to open new long positions in hopes that the upward trend would continue to the area of a high like 1.2208, where I recommend taking profits. The next target will be the level of 1.2235, but one can hardly bet on such an active growth from the pair without good macroeconomic reports for the eurozone. If the bulls are not active in the first half of the day in the area of 1.2141, and traders are disappointed with the reports, then we can expect a larger decline in EUR/USD. In this case, I recommend opening long positions only for a rebound from a low like 1.2103, counting on an upward correction of 20-25 points within the day.
To open short positions on EUR/USD, you need:
The bears will fight to prevent the pair from going beyond the upper boundary of the horizontal channel at 1.2179, a breakthrough of which will lead to a new upward trend for the euro. Therefore, only the formation of a false breakout at this level can create a signal for you to open short positions in hopes that the pair would fall to support 1.2141, where I recommend taking profits. This level is very important, so the bears will have to break it. A test of this level from the bottom up creates a signal to sell the euro for the purpose of continuing the downward trend to the area of a low like 1.2103, and the next target will be the support at 1.2055. Updating this area would seriously jeopardize the bullish trend we saw at the end of last week. If in the first half of the day today we observe an upward correction, and the bears show no activity in the area of resistance 1.2179: I recommend postponing short positions immediately to a rebound from a new large high of 1.2208 or even higher - from the level of 1.2235, from which one can count on a downward correction of 15-20 points within the day.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates the continued growth of the euro.
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
Surpassing the upper border of the indicator in the area of 1.2180 will lead to a new wave of euro growth. A breakthrough of the lower border of the indicator in the area of 1.2140 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.
