EUR/USD: plan for the European session on August 31. COT reports. Euro breaks out to new highs and aims to continue growth

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

Yesterday, several signals to enter the market were formed only in the second half of the day. Let's take a look at the 5-minute chart and understand the entry points. Nothing interesting happened in the morning. It is clearly seen that amid low volatility, even after the release of a number of fundamental reports for the eurozone, no activity on the part of buyers and sellers was observed. Only the German inflation report managed to shake the market a bit, which resulted in forming a false breakout in the support area at 1.1785 and created a signal to open long positions. To a normal extent, the signal managed to be realized only at today's Asian session, when the resistance level of 1.1809 was broken.

Before talking about the further prospects for the EUR/USD movement, let's see what happened in the futures market and how the Commitment of Traders positions have changed. The Commitment of Traders (COT) report for August 24 showed a clear decline in long positions and only a slight decline in short ones. All this before an important speech from Federal Reserve Chairman Jerome Powell in Jackson Hole. Many traders feared that he would announce more aggressive actions by the central bank to cut the bond buying program, and therefore, they tried to get rid of risky long positions in the euro. However, this did not happen and the euro moved up at the end of the week, renewing local highs. However, the demand for such assets is limited due to the lack of benchmarks caused by the rather high probability of another wave of the spread of the coronavirus, and the new "Delta" strain. All this will force the European Central Bank to continue to adhere to a wait-and-see attitude and maintain the stimulating policy at current levels, which limits the pair's upward potential. The COT report indicated that long non-commercial positions fell from 233,529 to 194,169, while short non-commercial positions fell from 175,889 to 169,539. By the end of the week, the total non-commercial net position immediately fell to 24,630 from the level of 57,640. The weekly closing price also dropped from 1.1777 to 1.1744.

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Today we are expecting a fairly large number of fundamental reports for the eurozone countries. A number of inflation indicators in the leading eurozone countries will be released in the first half of the day, as well as a general indicator for the region. Rapid growth is expected in the summer, which may lead to a good strengthening of the euro's position. The German labor market report will also be important, so don't forget this indicator as well. So far, everything points to the euro's succeeding growth, but on condition that the reports do not disappoint and do not turn out to be worse than the forecasts of economists. The initial goal for the first half of the day is the breakdown of the 1.1831 level. A breakthrough of this area with a reverse test from top to bottom generates a signal to open long positions in hopes that the euro would recover further and a continuation of the upward trend that we saw at the end of last week. The closest target will be the 1.1856 area . Its breakthrough with a similar consolidation creates another entry point for long positions, which will lead EUR/USD to new local levels: 1.1898 and 1.1937, where I recommend taking profits. In case we receive weak data on the eurozone and a negative market reaction to inflation reports with long positions, it is best not to rush. Longs can be opened subject to a false breakout in the 1.1809 area, where the moving averages, playing on the side of the bulls, pass. I advise you to buy EUR/USD immediately on a rebound only after the first test of the 1.1785 low, or even lower - from the level of 1.1765, counting on an upward rebound of 15-20 points within the day.

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

The bears have not shown much initiative yet, as clear evidence of the end of the bearish trend forces them to take a wait-and-see attitude, which is confirmed by the COT report I mentioned above. Only weak data on Germany and inflation in the eurozone countries can somehow ruin the bulls' life in the first half of the day. Forming a false breakout in the resistance area of 1.1831 will provide an excellent entry point into short positions with the goal of reaching 1.1809. Only a breakthrough and a test of this area from the bottom up will increase the pressure on the pair and open the way to the lows: 1.1785 and 1.1765, where I recommend taking profits. If the bears are not active in the 1.1809 area and we receive strong data on the eurozone this morning, I advise you to open short positions only after a false breakout in the 1.1856 area is formed. Selling EUR/USD immediately on a rebound is best done only after the test of the new local resistance at 1.198, or even higher - in the 1.1937 region, counting on a downward correction of 15-20 points.

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I recommend that you familiarize yourself with:

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates continued growth in the euro in the short term.

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 pair falls, support will be provided by the lower border of the indicator around 1.1780.

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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