To open long positions on EUR/USD, you need:
Yesterday was a fairly calm trading day within the horizontal channel, which was formed on Wednesday. Nobody wanted to risk an important report on the US labor market, based on which the Federal Reserve will make decisions on monetary policy. Let's take a look at the 5 minute chart. Before the test, the level of 1.1305 was not enough in the first half of the day, so it was not possible to get a good entry point into long positions from there. We also fell short of the nearest resistance level. We also did not reach any of the indicated levels during the US session, therefore, we also failed to receive signals to enter the market.
From a technical point of view, little has changed and the entire focus will of course be on the US labor market. However, a number of interesting reports on the European economy will also be published in the first half of the day, which may lead to a surge in volatility and allow the bulls to fight for the nearest resistance at 1.1310. Eurozone PMI data and composite PMI will help the euro, but on the condition that the results exceed economists' forecasts. Only then can we expect a breakthrough and consolidation above 1.1310, where the moving averages, playing on the side of bears, pass. A test of this level from top to bottom will provide an excellent entry point with the goal of returning EUR/USD to the area of the upper boundary of the horizontal channel at 1.1344, above which it was not possible to get above it yesterday. A breakthrough of this range after weak data on the US labor market will lead to a larger upward correction to the area of the weekly high of 1.1380, where I recommend taking profit. A further target will be the level of 1.1442, but this is on condition that the data on the change in the number of people employed in the US non-agricultural sector will disappoint traders and turn out to be much worse than economists' forecasts. If the pressure on the euro persists in the first half of the day, and the report on the change in the volume of retail trade in the eurozone disappoints traders, it is best not to rush into long positions, but wait for a false breakout to form in the 1.1274 area. Only such a scenario will provide a good entry point into long positions. In case the bulls are not active at this level, it is best to postpone selling until the larger support at 1.1238. I advise you to buy EUR/USD immediately on a rebound from the 1.1188 low, or even lower, around 1.1155, counting on an upward correction of 20-25 points within the day.
To open short positions on EUR/USD, you need:
So far, the bears are fulfilling all the tasks assigned to them, counting on a very good report on the US labor market, which will allow the euro to collapse in the area of the November lows. The bears' main task for today is to protect 1.1310, above which the moving averages pass. A false breakout there, coupled with the dovish rhetoric of European Central Bank Executive Board member Philip Lane and weak eurozone service sector activity for November, would provide an excellent entry point for short positions in anticipation of renewed bearish momentum seen last month. Pressure on the euro will also come from news that Germany is introducing a number of quarantine restrictions due to a new strain of coronavirus. Most likely, many other European countries will also follow suit in the near future. Any news of another rapid proliferation of the Omicron will drive the euro down. An equally important task for the EUR/USD bears is to regain control over the support at 1.1274. Its breakdown and test from the bottom up will lead to the formation of a signal to open short positions with the prospect of a decline to the 1.1238 area. The next target will be the support at 1.1188, where I recommend taking profits. If the euro grows and the bears are not active at 1.1310, it is better to wait with short positions. The optimal scenario will be short positions when a false breakout is formed around 1.1344. You can open short positions immediately on a rebound from the highs: 1.1380 and 1.1442, counting on a downward correction of 15-20 points.
I recommend for review:
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.
Trading is carried out below the 30 and 50 daily moving averages, which indicates the formation of a certain pressure on the euro.
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.
In case of growth, the upper border of the indicator at 1.1344 will act as resistance. A break of the lower border at 1.1274 will increase pressure on the euro.
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.