To open long positions on EUR/USD, you need:
No matter how much the bears tried to continue pulling down the euro yesterday afternoon, nothing came of it. On the 5-minute chart, you can see how, having taken the 1.1648 level, sellers of the euro are desperately resisting and won't allow the pair go above this range, but each time a new downward wave becomes shorter than the previous one, and as a result, sellers gave up and released the market, although the signal to open short positions was quite good. It's a pity we didn't go down more than 25 points. A similar situation, if you remember, happened with buy positions in the morning, when bulls formed a false breakout and tried to pull the euro into the resistance area of 1.1695, but nothing came of it either.
At the moment, buyers of the euro will focus on a breakout and settling above the resistance of 1.1688, because in this scenario we can expect the upward correction to continue for the euro, with the main goal of updating the high of 1.1734, which is where I recommend taking profit. The 1.1779 level will be a distant target, but it will not be so easy to reach it, since important fundamental data will not be released today. If EUR/USD declines in the first half of the day, and it is worth recalling that we have a downward trend and it is better to trade on it, then I recommend looking at long positions only after a false breakout forms in the 1.1631 area. You can buy EUR/USD immediately on a rebound only from the low of 1.1585 or even lower, from the 1.1541 area, counting on a correction of 20-30 points within the day.
Let me remind you that the Commitment of Traders (COT) reports for September 15 continued to record a reduction in long non-commercial positions and an increase in short ones, which confirms the downward correction in EUR/USD that we recently observed. Long non-commercial positions fell from 248,683 to 230,695, while short non-commercial positions rose from 51,869 to 52,199. The decisions that the Federal Reserve made last week supported the US dollar. and new problems with the spread of coronavirus infection in the EU do not make it possible for euro buyers to seriously expect large players to return to the market. But do not forget that even though the euro has fallen, the total non-commercial net position, which slightly decreased over the reporting week, still remained at a positive level. As a result, the non-commercial net position fell to 178,576 against 196,814 a week earlier.
To open short positions on EUR/USD, you need:
Sellers keep the market under their control, and all they need in the morning is to form a false breakout in the resistance area at 1.1688, which will increase pressure on the euro and cause the pair to fall to a low of 1.1631, below which yesterday's break through failed. Settling below this range forms a new entry point for short positions on EUR/USD in order to test the low of 1.1585, which is where I recommend taking profit. In case the euro grows in the first half of the day, and the correction might continue since there is no important fundamental data for today, which hindered the euro all week, you can consider short positions only after a false breakout forms at 1.1688. If bears are not active at this level, it is best to postpone sell positions until the larger resistance at 1.1734 has been updated and open short positions from there immediately for a rebound, counting on a downward correction of 20-30 points by the end of the day.
Trading is carried out in the area of 30 and 50 moving averages, which indicates the possibility of an upward correction in 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.
A breakout of the lower border of the indicator in the 1.1631 area will lead to a new wave of decline for the euro. A breakout of the upper border at 1.1688 will lead to an increase in the euro.
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.
- The MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages). Quick EMA period 12. Slow EMA period to 26. The 9 period SMA.
- Bollinger Bands (Bollinger Bands). The 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.