To open long positions on EUR/USD, you need:
The euro remains under pressure against the US dollar and the bulls have only one chance to somehow rectify the situation in their favor. Yesterday morning, the euro bulls seized the moment and tried to "pull the blanket" to their side, defending the support at 1.1705, but this did not work out very well. Let's take a look at the 5 minute chart and talk about what happened. A false breakout at this level resulted in forming a signal to open long positions, however, having gone up 10 points, the demand for the euro quickly declined. A repeated test of this area led to a breakthrough, but I did not wait for the reverse update of 1.1705, which forced me to miss the downward movement of the euro. The pair did not reach the levels I indicated in the afternoon, therefore no signals were formed to enter the market.
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 September 21 revealed a sharp increase in short positions and only a slight increase in long positions, which is due to the lack of desire among traders to bet on strengthening risky assets at the beginning of this fall. The prospect of changes in the monetary policy of the Federal Reserve in November this year maintains demand for the US dollar, as many investors expect the start of a reduction in the bond purchase program from the central bank. The fact that inflation in the United States of America is almost out of control by the Fed speaks of possible more aggressive actions by the end of the year, which could seriously affect the sentiment of traders and investors. This week there will be a fairly large number of speeches by both the Fed and Chairman Jerome Powell, which may shed light on how the central bank will act in any given situation. Considering that energy prices continue to fly up, which will certainly affect the producer and consumer price index, specifics from the Fed would certainly not interfere with the markets. The demand for risky assets will remain limited due to the high likelihood of another wave of the spread of the coronavirus, and its new strain Delta. All this will force the European Central Bank to continue to adhere to a wait-and-see attitude and maintain its stimulating policy at current levels, since there are no serious inflationary problems in the eurozone so far. The COT report indicated that long non-commercial positions rose only slightly - from 186,554 to 189,406, while short non-commercial positions jumped quite seriously - from 158,749 to 177,311. At the end of the week, the total non-commercial net position dropped from the level of 27,805 to the level of 12,095. The weekly closing price also dropped to 1.1726 from 1.1809.
Today we do not have any important fundamental statistics for the eurozone countries, so in the first half of the day the advantage that the bulls achieved in the Asian session may quickly dissolve in the face of tough demand for the US dollar. The initial target of the bulls for the first half of the day is the breakthrough of the 1.1708 level, in the area of which there are moving averages, playing on the side of the bears. Only a test of this area from top to bottom generates a signal to open long positions in hopes of a recovery in the euro and the resumption of the upward correction, which may just end. In this case, the closest target will be the area of 1.1727. Its breakthrough with a similar consolidation forms an additional entry point for long positions, which will lead EUR/USD to new local levels: 1.1749 and 1.1775, where I recommend taking profits. If the pressure on the pair is maintained, long positions can be opened only if a false breakout is formed around 1.1683. Yesterday's speech by ECB President Christine Lagarde did not greatly affect the euro. Let's see what Lagarde will talk about today. However, the focus will, of course, shift to the afternoon when interviews with Fed representatives are released. I advise you to buy EUR/USD immediately on a rebound only after the first test of a new weekly low in the 1.1657 area, or even lower - from the 1.1631 level, counting on an upward rebound of 15-20 points within the day. A renewal in this area will be evidence of a renewed bearish trend.
To open short positions on EUR/USD, you need:
Bears continue to keep the market under their control. Today's lack of important fundamental data on the euro area could return the pressure on the euro, so it is better to stick to further selling EUR/USD from the major resistance levels. Forming a false breakout in the 1.1708 area, where the moving averages pass, will be one of the first such signals. This will provide an excellent entry point into short positions with the goal of pulling it down to the large support at 1.1683, which only leaves the bulls a chance for the euro's recovery. 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: 1.1657 and 1.1631, where I recommend taking profits. If the bears are not active in the 1.1708 area in the first half of the day, I advise you to open short positions only after forming a false breakout in the 1.1727 area. Selling EUR/USD immediately on a rebound is best only after testing the new local resistance at 1.1749, counting on a downward correction of 15-20 points.
Trading is carried out below 30 and 50 moving averages, which indicates that the bears are trying to build a new downward trend.
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 upper border of the indicator in the area of 1.1708 will lead to a new wave of euro growth. Surpassing the lower border in the area of 1.1685 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.