To open long positions on EUR/USD, you need:
Several signals to enter the market were formed yesterday. Let's take a look at the 5 minute chart and see what happened. In the first half of the day, the bears did their best to protect the resistance at 1.1846, but this was not enough. After forming a false breakout at the level of 1.1846, it was expected that the pressure on the euro would increase and we would see a good downward movement of the pair. However, the bulls' plans were completely different. After some "smearing" of the 1.1846 level, the pair continued their slow advance to the upside, counting on the renewal of the 1.1870 high. The reverse return and the test of 1.1844 from top to bottom during the US session resulted in creating an excellent entry point into long positions in order for the pair to rise to a high like 1.1870, which happened.
Today, a fairly large series of data on activity in the service sector of the eurozone countries will be released in the morning, however, the indicators are unlikely to impress the market, as everyone will be waiting for the Non-Farm Employment Change report on the US labor market, which will become the defining one for the dollar in the near future. Considering that the bulls do not want to let go of the market, at the moment they need to rise above the level of 1.1898. The breakthrough of this range and its reverse test from top to bottom creates a good entry point into long positions in continuation of the upward trend with the goal of updating the resistance at 1.1937. The next task is to reach the 1.1984 high, where I recommend taking profits. In case EUR/USD falls in the first half of the day, a good entry point is to form a false breakout at the level of 1.1870, just below which there are moving averages playing on the side of the bulls. If traders are not active around 1.1870 and weak data for the eurozone, you can open long positions in EUR/USD after a false breakout in the 1.1844 area, but I advise you to buy EUR/USD immediately on a rebound only at the 1.1821 low, or even lower - around 1.1797 based 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 in the 1.1898 resistance area and what fundamental data will be released on the PMI index of the eurozone for the services sector. The eurozone retail sales report for July is unlikely to be significant for the market. Weak data will allow the bears to protect the resistance at 1.1898, but only a false breakout on it will result in creating the first entry point to short positions in hopes that the pair would fall within the day. The next target will be a breakthrough and consolidation below the support at 1.1870. A reverse test of this level will return pressure to the pair and create another signal to sell the euro with a renewal of the 1.1844 low. The next target will be the area of 1.1821, but today we can only count on such a powerful downward movement after a strong report on the number of people employed in the US non-agricultural sector. If EUR/USD continues to grow along the trend in the first half of the day and the bears are not active at 1.1898, it is best to postpone short positions until the test of the larger resistance at 1.1937. I advise you to sell the pair immediately on a rebound counting on a downward correction of 15-20 points only from a new weekly high of 1.1984.
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 1.1844 will lead to a fall in the pair. Surpassing the upper border of the indicator around 1.1892 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.