To open long positions on EUR/USD, you need:
In yesterday's afternoon forecast, I drew attention to buying the euro in the support area of 1.1701, the breakdown of which took place in the middle of the day. If you look at the 5-minute chart, you will see how buyers confirmed their presence with several more false breakouts, afterwards the euro went up further, just barely reaching the resistance of 1.1754. However, the bullish momentum did not continue and after the first results of voting in different states appeared, it became clear that Biden's victory would not be so easy, if at all. According to the results of the first polls, 14 states voted for Donald Trump, against 12, which prefer to see Joe Biden as the new president. Accordingly, the market reaction was not long in coming and the US dollar regained all its positions, renewing its monthly lows against the euro.
At the moment, it is better not to rush to enter the market at such volatility, since we are not certain whether we can reach such large levels today, since no one knows which direction the market will prefer. One thing is clear, the bulls need to settle above the resistance of 1.1663, which will push the pair up to the high of 1.1701. However, I recommend building up long positions after settling above this range with the goal of reaching the 1.1765 level, from which the entire fall began today. In case the pair falls, forming a false breakout in the support area of 1.1604 will keep buyers optimistic. The absence of bulls' activity in that area will pull down the pair to a low of 1.1541, where we can watch the downward movement stop and an upward correction of 15-20 points. I recommend buying EUR/USD immediately on a rebound only from the low of 1.1490.
To open short positions on EUR/USD, you need:
Sellers have one simple task - to keep the resistance at 1.1663, where forming a false breakout will be a signal to open short positions in the euro. Slightly higher is the no less important level of 1.1701, which I also recommend paying attention to, as its breakout will lead to a powerful bullish momentum. The bears' main goal in the first half of the day will be to form a breakout and get the pair to settle below the support of 1.1604, which will raise the pressure on the euro and lead to a large sale of EUR/USD to the area of the lows of 1.1541 and 1.1490. You can count on such a scenario after the release of a number of fundamental statistics on activity in the service sector of the eurozone countries, which will probably slow down due to the spread of the coronavirus pandemic. In case EUR/USD grows above the resistance of 1.1701, there is no need to rush to sell. It is best to postpone short positions until the 1.1765 highs are renewed in hopes of a 15-20 point correction, or to sell the euro for a rebound from the new local highs of 1.1835 and 1.1915.
The Commitment of Traders (COT) report for October 27 showed a reduction in both long and short positions. Despite this, buyers of risky assets believe that the bull market will continue and so they prefer to act with caution. Thus, long non-commercial positions fell from 229,878 to 217,443, while short non-commercial positions also fell to 61,888 from 63,935. The total non-commercial net position decreased to 155,555 from 165,943 a week earlier. However, the bullish sentiments for the euro remains rather high in the medium term. The more the euro will decline against the US dollar at the end of this year, the more attractive it will be for new investors, especially following the US presidential elections, when additional pressure on the market on this issue eases.
Trading is carried out just below the 30 and 50 moving averages, which indicates an active opposition of buyers and sellers.
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 D1 daily chart.
In case of growth, the upper border of the indicator at 1.1765 will act as resistance.
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.