To open long positions on EUR/USD, you need:
Yesterday, the euro bulls did an excellent job with all the tasks set for them. Let's take a look at the 5 minute chart and see what happened. In my morning forecast, I paid attention to 1.1262 and advised you to make a decision from it. Unsuccessful consolidation below 1.1262 and a false breakout resulted in forming a good entry point to long positions in continuation of the Friday trend. After that, the pair rose by 35 points, but then the pressure returned. A similar situation occurred in the second half of the day - the bulls actively defended the support at 1.1262 for a long time, resulting in a false breakout and a 30-point rise by the end of the US session.
Before talking about the future prospects of the EUR/USD movement, let's look at what happened in the futures market and how the positions of Commitment of Traders have changed. The Commitment of Traders (COT) report for November 23 revealed that both short and long positions increased. However, there are still more of the former, which led to an increase in the negative delta. The data on activity in the manufacturing sector of the eurozone countries provided significant support to the euro last week, but the pressure on risky assets remained. A strong US GDP report and Federal Reserve minutes from its last meeting have boosted the dollar as many traders look forward to more aggressive monetary policy changes as early as December this year. However, all this can be prevented by the new strain of the Omicron coronavirus, the spread of which is actively observed in the eurozone and African countries. This strain has not yet been registered in the US, but it is only a matter of time. Bulls can only wait for hawkish statements from European politicians, which were actively sounded last week, which also supported the euro. The latest November COT report indicated that long non-commercial positions rose from 198,181 to 204,214, while short non-commercial positions also jumped from 202,007 to 220,666. At the end of the week, the total non-commercial net position increased to -16,452 against -3,826. The weekly closing price dropped to 1.1241 against 1.1367.
Today we have published a fairly large number of fundamental statistics for the eurozone countries. It will start with Italy's GDP and end with rising consumer spending in France. But more important is the report on the growth of the consumer price index in the euro area. A jump is expected immediately to 4.4%, which, of course, can provide good support for the euro, since the growth of this indicator will most likely affect the plans of the European Central Bank regarding monetary policy. In case of more positive results than forecasted, the euro may strengthen its positions against the US dollar, and we will get a chance for a further upward correction in the morning. Therefore, the bulls' initial task is to settle above 1.1326. Only a breakthrough and a test of this area from top to bottom can generate a signal to open long positions, counting on the pair's growth. In this scenario, an equally important goal is to regain control over the next resistance at 1.1371, which will more or less level the situation for euro bulls and seriously affect the current bear market observed recently. A breakthrough of this range with a similar consolidation forms an additional entry point to buy, which will lead EUR/USD to the local high at 1.1417, where I recommend taking profits. A more optimal option for buying would be a downward correction in the first half of the day to the support area at 1.1278, where the moving averages, playing on the side of bulls, pass. The formation of a false breakout there will provide an excellent entry point to the market. In the absence of bullish activity at 1.1278, it is best to postpone long positions. Only a false breakout at 1.1231 can create a new entry point, counting on an upward correction in the pair. I advise you to buy EUR/USD immediately on a rebound only after the first test of the 1.1188 low, or even lower - from the level of 1.1155, counting on an upward rebound of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears achieved their target yesterday and continued the pair's downward trend. Today's data indicating a slowdown in activity in the eurozone towards the end of the year may further upset bulls, which will increase the pressure on the pair. However, a more convenient entry point into short positions will be the formation of a false breakout at the level of 1.1263, the test of which bulls are counting on. This will lead to forming the first signal to sell the euro further along the trend and push the pair into the area of a new weekly low at 1.1222. A breakthrough and test of this area from the bottom up will increase the pressure on EUR/USD and open the way to areas: 1.1193 and 1.1155. I recommend taking profits on short positions there. In case the euro grows during the European session and the bears are not active around 1.1263, I advise you to postpone short positions until the next resistance test at 1.1301. But even there, it is best to open short positions after the formation of a false breakout. The best option for selling EUR/USD immediately on a rebound will be a high around 1.1359. You can count on a downward correction of 15-20 points.
Trading above 30 and 50 moving averages indicates that the bulls are trying to build a larger upward correction.
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 1.1315 will lead to an increase in the euro. In case of a decline, the lower border of the indicator in the area of 1.1260 will act as a support.
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.