EUR/USD: plan for the European session on August 26. COT reports. Euro is getting out to the next weekly highs and is aiming

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

Yesterday, several signals to enter the market were formed and all of them were quite profitable. Let's take a look at the 5 minute chart and break them down. In my morning review, I paid attention to the level 1.1757 and recommended making decisions from it. It is clearly seen that after the data on Germany, the bulls tried to rise above the resistance of 1.1757 but failed, which resulted in forming a false breakout and a signal to open short positions. The signal is being fully implemented, which leads to a support update to 1.1728. There, the bulls very quickly form a false breakout, which creates the entry point for buying the European currency. Growth of EUR/USD in the second half of the day allowed updating weekly highs and taking about 30 more points from the market.

This morning we will receive data on lending to the eurozone and GDP in France. It is unlikely that these reports will somehow affect the euro, so the upward potential of the pair may well remain until the speech of Federal Reserve Chairman Jerome Powell in Jackson Hall. Predicting the pair's direction during Powell's statements will be very difficult, so it is best to navigate on the spot. As for the technical picture for the European session: the primary task of the bulls is to protect the support 1.1755, just below which are the moving averages playing on the side of the bulls. Forming a false breakout there creates a good signal to open long positions in continuation of the upward trend of the pair with the key target of reaching the 1.1783 high. A more important task will be a breakthrough and reverse test from top to bottom of this level, which also creates a buy signal with the aim of recovering to 1.1804, where I recommend taking profits. The next target will be the area of 1.1829, but this level will be available after Powell's speech and if an upward trend has formed. In case EUR/USD falls in the first half of the day and it is not active in the 1.1755 area, I advise you to postpone long positions and wait for the renewal of the low at 1.1727, which once again helped out the bulls yesterday. It is possible to open long positions in EUR/USD immediately on a rebound from the support of 1.1697, 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:

Although the bears tried to fight back the bulls yesterday, however, during the US session, they gave up again and allowed local highs to be updated, which further consolidated the upward trend. Today, their estimate in the first half of the day is on disappointing data on GDP in France and lending in the euro area, the reduction of which may slow down the pace of economic recovery. The initial task of the bears is to regain control of the 1.1755 level. Only a breakthrough and reverse test of this range will return pressure to the pair and generate a signal to sell the euro in order to renew the low of 1.1727. The next target will be the area of 1.1697, but today we can count on such a powerful downward movement only after Powell's speech in Jackson Hole. In case EUR/USD grows further during the European session, only the formation of a false breakout at the level of 1.1783 forms the first signal to open short positions in hopes of a return of the bear market. If it is not active at 1.1783, it is best to postpone selling until the test of the larger resistance at 1.1804. I advise to sell the pair immediately on a rebound counting on a downward correction of 15-20 points only from a high like 1.1829.

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I recommend that you familiarize yourself with:

The Commitment of Traders (COT) report for August 17 showed that there is a clear increase in traders' interest in the market, since long positions have sharply grown, but short positions have remained practically unchanged, which may indicate that buyers of risky assets are feeling the low. Eurozone GDP and inflation data released last week were in full agreement with economists' forecasts, which is generally not bad, as everything is going according to the expectations and plans of the European Central Bank. The situation towards the bulls changed when the Federal Reserve's minutes was published, where the members of the committee members' views on the future policy were divided - this supported risky assets and caused the pair's downward trend to come to a stop. The lack of benchmarks due to the new strain of the Delta coronavirus and the incomprehensible reaction of the European economy to it in the fall - all this forces the ECB to continue to adhere to a wait-and-see attitude and maintain a stimulating policy at current levels, which limits the pair's upward potential. The COT report indicated that long non-commercial positions rose from 212,809 to 233,529, while short non-commercial positions fell from 178,952 to 175,889. By the end of the week, the total non-commercial net position increased from 33,857 to 57 640. The weekly closing price also rose from 1.1736 and 1.1777.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates a continuation of the upward trend for the pair.

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

Surpassing the upper border of the indicator in the area of 1.1783 will lead to a new wave of euro growth. In case it falls, support will be provided by the lower border of the indicator in the area of 1.1740.

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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