To open long positions on EUR/USD, you need:
Yesterday was spent in a bitter struggle for where the movement will develop further. And even though it's too early to say that the bulls on the euro won, the fact that we didn't see another bull sell-off after the Asian session's fall speaks for itself. In my morning forecast, I paid attention to the 1.1686 level and recommended making decisions from it. Let's take a look at the 5-minute chart and break down the entry points. The breakthrough of 1.1686 in the first half of the day occurred without a reverse test of this level, so no entry point for selling was formed. Then the bulls were able to quickly rehabilitate and had brought back 1.1686 under their control. A reverse test of this area after that resulted in forming a signal to open long positions. As a result, the upward movement was about 20 points and that was the end of it. A similar signal was formed in the second half of the day, but there was no particularly rapid upward growth of the euro. From a technical point of view, the nearest support and resistance levels have changed only a bit, but the overall picture remains the same.
The report on the German producer price index will be released this morning, where a slight slowdown in growth is expected in July compared to June. If the data coincides with the forecasts of economists, this will not affect the EURUSD pair in any way. The bulls' initial task is to regain control of the resistance at 1.1702, which was formed at the end of yesterday. Only a test of this level from top to bottom will generate a signal to buy the euro with the aim of recovering to 1.1740, where I recommend taking profits. It will be extremely difficult to talk about a breakthrough of this range, since we also do not expect important fundamental reports during the US session. Only the breakthrough of 1.1740 and the reverse test will provoke a larger upward correction of the pair already to the 1.1769 area. The next target will be the resistance at 1.1799, the renewal of which will be a clear signal for forming a new bullish trend. In case EUR/USD falls in the first half of the day, a serious challenge for the bulls is to protect the support at 1.1669. You can open long positions only when a false breakout is formed there. In case EUR/USD falls during the European session and the bulls are not active in this range, I advise you to wait until the 1.1628 low has been updated, or to buy EUR/USD immediately on the rebound from the support of 1.1604, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears, although they keep the market under their control, run the risk of running into trouble if they do not become active again. There are no strong fundamental statistics for the eurozone, and one can hardly count on bad data on the German producer price index. The initial task of the bears is to break and reverse test the level of 1.1669 from the bottom up, which will increase the pressure on the pair and form a signal to sell the euro in anticipation of renewing new lows: 1.1628 and 1.1604, where I recommend taking profits. The next target will be the area of 1.1541. In the event of an upward correction during the European session, only the formation of a false breakout at the level of 1.1702 forms the first signal to open short positions in hopes of a continuation of the bear market. In case EUR/USD grows and the bulls are not active at 1.1702, it is best to postpone selling until the test of the larger resistance at 1.1740. You can also open short positions there only after a false breakout has formed. I recommend selling the pair immediately on a rebound counting on a downward correction of 15-20 points only from a high like 1.1769.
In the Commitment of Traders (COT) report for August 10, there is a clear increase in traders' interest in the market, as both long and short positions increased, but the latter turned out to be more, which led to a reduction in the positive delta. Last week, many traders focused on the consumer price index of the United States of America, which has slowed after record growth rates and in line with economists' forecasts. This seriously influenced the desire of traders to buy the US dollar in anticipation of the imminent changes in the bank's monetary policy. Given these inflationary surges, the Federal Reserve can be expected to slow down the changes in the bond buying program that many investors were counting on as early as September this year. Accordingly, this will weaken the dollar's position. But you shouldn't think that against this background the euro will sharply rise. The lack of benchmarks due to the new strain of the Delta coronavirus and the incomprehensible reaction of the European economy to it - all this will force the European Central Bank to continue to adhere to a wait-and-see attitude and maintain a stimulating policy at current levels, and this negatively affects the euro. Therefore, all that remains is to look at small surges of volatility within the day - at least this state of the market will be until the fall of this year. The COT report indicated that long non-commercial positions rose from 199,067 to 212,809, while short non-commercial positions jumped from 161,060 to 178,952. By the end of the week, the total non-commercial net position decreased from 38,007 to the level of 33 857. The weekly closing price also dropped from 1.1874 to 1.1736.
Trading is carried out below the 30 and 50 moving averages, which indicates a continuation of the bear market.
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.
Surpassing the upper border of the indicator in the area of 1.1702 will lead to a new wave of euro growth. A breakthrough of the lower boundary at 1.1669 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.