To open long positions on EUR/USD, you need:
Yesterday, the euro bulls prepared themselves quite well for the inflation data, and after making sure that there was no danger and no "fire", they began to be more active. Let's take a look at the 5-minute chart and talk about what happened. Even in the first half of the day, I paid attention to the level 1.1711 and recommended making decisions on entering the market from it. It is clearly seen how the bulls tried to form a false breakout in the 1.1727 area during the European session, which resulted in creating a signal to buy the euro. However, even after the release of strong inflation data in Germany, there was no upward movement. A similar entry point was formed in the second half of the day, which pushed the euro to sharply rise by 40 points after the US CPI.
This morning the traders will focus on the indicator on the change in the volume of industrial production in the eurozone. Good data will strengthen the euro's position and allow the bulls to cope with the first resistance at 1.1752, which will be the main focus. Only a breakthrough of this area and its reverse test from top to bottom can generate a signal to open long positions in hopes that the pair would rise to the level of 1.1769, and then to the high of 1.1787, where I recommend taking profits. The next task is to update 1.1808. In case we receive a disappointing production report and the bulls are not active in the morning, it is best not to rush into buying. A rather important task is to protect the support at 1.1729, where the moving averages, playing on the bulls' side, are just passing. Forming a false breakout there will lead to an entry point into long positions, which will also make it possible for us to build the lower border of a new rising channel. In case EUR/USD falls further during the European session and the bulls are not active around 1.1729, I advise you to wait for the update of this month's low around 1.1707, or buy EUR/USD immediately on a rebound from the support of 1.1682, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears could not protect the level of 1.1738, as a result of which the euro continued to rise during the US session. Now the bears will focus on the new resistance at 1.1752. Weak data on industrial production in the eurozone may return pressure to EUR/USD, and the formation of a false breakout at the level of 1.1752 creates the first signal to open short positions in expectation of the pair "hanging" in a horizontal channel. A more important task will be the breakthrough and reverse test of the 1.1729 level, in the area of which the moving averages are taking place. Only this scenario can generate a signal to open new short positions, which will push the pair to this month's low at 1.1707, where I recommend taking profits. A further target will be the area 1.1682. In case of further upward correction of EUR/USD during the European session and the bulls are not active at 1.1752, it is best to postpone selling until the test of the larger resistance at 1.1769. You can also open short positions there only after the formation of a false breakout. I recommend selling the pair immediately on a rebound counting on a downward correction of 15-20 points only from a high like 1.1787.
There are no obvious changes in the balance of power in the Commitment of Traders (COT) report for August 3. The absence of important fundamental statistics on the eurozone last week and the summer pause forced traders to take a wait-and-see attitude. The focus was shifted to the US labor market data, which was published late last week, but this COT report does not include its results, so it seems that everything has remained unchanged. In fact, the market movement is acquiring a bearish character again, as the data on the number of employees in the non-agricultural sector of the United States turned out to be much better than the forecasts of economists, which allows counting on an earlier curtailment of the asset purchase program by the Federal Reserve. Representatives of the committee have already started talking about this at the beginning of this week, whose speeches will continue throughout the week. The COT report indicated that long non-commercial positions fell from 202,245 to 199,067, while short non-commercial positions fell from 164,119 to 161,060. We will only receive important fundamental statistics on US inflation by the end of the week, which may seriously affect the direction of the EUR/USD pair, but on condition that the data diverge from the forecasts of economists. Many expect inflation to slow down. If this happens, the euro will regain its position. If the data indicate continued rapid growth in CPI, the US dollar continued to strengthen its positions against the European currency. At the end of the week, the total non-commercial net position decreased from 38,126 to 38,007. The weekly closing price increased from 1.1804 to 1.1874.
Trading is carried out above 30 and 50 moving averages, which indicates the advantage of euro bulls.
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 breakthrough of the upper border of the indicator in the 1.1755 area will lead to a new wave of euro growth.
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.