To open long positions on EUR/USD, you need:
Several signals to enter the market were formed yesterday, but all of them were unsuccessful. Let's take a look at the 5 minute chart and see what happened. In the first half of the day after the release of weak data on retail sales in Germany, the euro stopped at the resistance area of 1.1820, where a false breakout and the first sell signal was formed. But after a while, the bulls managed to rise above this range, which resulted in knocking down stop orders. A similar situation took place with the 1.1844 level in the afternoon. It would seem that the bears managed to protect the resistance at 1.1844 and created an excellent entry point for short positions there, but weak data on the US labor market caused the euro to rise.
Today, important fundamental statistics are not expected and only the report on the producer price index of the eurozone will attract attention, which is unlikely to affect the euro's direction. Against this background, we can expect the euro to rise in the first half of the day. The bulls need to rise above the 1.1846 level. The breakthrough of this range and its reverse test from top to bottom can create a good entry point into long positions in continuation of the upward trend with the goal of updating the resistance at 1.1870. The next task is to reach the 1.1898 high, where I recommend taking profits. In case EUR/USD falls in the first half of the day, a false breakout at the level of 1.1821 will be a good entry point. There are also moving averages that play on the side of the bulls. If there is no bullish activity around 1.1821 and we receive weak data for the eurozone, you can open long positions in EUR/USD immediately for a rebound only from the support at 1.1797, which may become the lower border of the horizontal channel. You can also buy the euro on a rebound from the level of 1.1769, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears may try to regain control over the market, so it is very important how they show themselves today in the 1.1846 resistance area and what fundamental data will be released for Germany. The initial task of the bears during the European session will be to protect the level of 1.1846, and only a false breakout on it will lead to creating the first entry point to short positions in hopes that the pair would fall within the day. In this case, the target will be the breakthrough and consolidation below the support of 1.1821. Only a reverse test of this level will return pressure to the pair and generate an additional signal to sell the euro in order to renew the 1.1797 low. The next target will be the area of 1.1769, but such a powerful downward movement today can only be expected after the US labor market report is released, expected in the afternoon. In case EUR/USD grows in the first half of the day and the bears are not active at the level of 1.1846, it is best to postpone selling until the test of the larger resistance at 1.1870, and I recommend selling the pair immediately on a rebound, counting on a downward correction of 15-20 points, I advise only from a new weekly the high of 1.1898.
I recommend that you familiarize yourself with:
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.
Trading is carried out above 30 and 50 moving averages, which indicates the likelihood of 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.
A breakthrough of the lower border of the indicator in the area of 1.1821 will lead to a fall in the pair. A breakout of the upper border of the indicator around 1.1855 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.