EUR/USD: plan for the European session on August 23. COT reports. An upward correction in the euro and a test of the strength

To open long positions on EUR/USD, you need:

Last Friday there was a signal to open long positions in the expectation of an upward correction, which the market had been lacking for so long. Let's take a look at the 5-minute chart and talk about what happened. It is clearly seen how a false breakout in the 1.1669 area resulted in creating a signal to open long positions in the pair. After that, there was an increase in the area of resistance at 1.1702, where I recommended taking profits. As a result, the upward movement left about 30 points - almost all the intraday volatility of the pair.

Today there are a number of reports on activity in the manufacturing and service sectors of the eurozone countries. It is unlikely that the indicators will seriously diverge from the preliminary values, but it is necessary to pay attention to the reports - it could indicate the state of the economy in which the next autumn of the coronavirus pandemic will come. In today's Asian session, the bulls have already emerged, having achieved a breakthrough of the resistance at 1.1699. Their initial task is to protect this level. Only the formation of a false breakout there can create a good signal to open long positions in continuation of the pair's upward correction. A more important task is a breakthrough and reverse test from top to bottom of the level of 1.1740, which also creates a signal to buy the euro with the aim of recovering to 1.1769, where I recommend taking profits. The next target will be the area of 1.1799. In case EUR/USD falls in the first half of the day and it is active in the 1.1699 area, I advise you to postpone long positions and wait for the renewal of the low at 1.1666, which also acts as the lower border of the current horizontal channel. It is possible to buy EUR/USD immediately on a rebound from the support of 1.1628, counting on an upward correction of 15-20 points within the day.

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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. Good data for the euro area could lead to a sharper rise in the euro. The initial task of the bears is to regain control of 1.1699. Only a breakthrough and reverse test of this range will return the pressure to the pair and generate a signal to sell the euro, counting on the renewal of last week's low of 1.1666. The next target will be the area of 1.1628, but one can hardly count on such a powerful downward movement today. In case of further upward correction during the European session, only the formation of a false breakout at the level of 1.1740 can create the first signal to open short positions in hopes of restoring the bear market. In case EUR/USD grows and the bears are not active at 1.1740, it is best to postpone selling until the test of the larger resistance at 1.1769. I advise to sell the pair immediately on a rebound counting on a downward correction of 15-20 points only from a high like 1.1799.

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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.

Indicator signals:

Trading is carried out above 30 and 50 moving averages, which indicates the formation of an upward correction in the pair.

Moving averages

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

In case the euro falls, support will be provided by the lower border at 1.1666.

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.
The material has been provided by InstaForex Company - www.instaforex.com

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