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FX.co ★ EUR/USD: plan for the European session on May 4. COT reports. There may be problems with the euro's growth. Buyers hit resistance at 1.2074

EUR/USD: plan for the European session on May 4. COT reports. There may be problems with the euro's growth. Buyers hit resistance at 1.2074

To open long positions on EUR/USD, you need:

The euro's active growth in the first half of the day made it possible to partially win back positions following last Friday's fall. A sharp decline in manufacturing activity in the US hit the dollar's positions in the afternoon. However, in today's Asian session, the bears returned to the market and did not allow the pair to rise above resistance at 1.2074. The bull's main task is to surpass this level.

Before talking about the further prospects for the EUR/USD movement, let's look at what happened in the futures market and see how the Commitment of Traders (COT) positions have changed. The COT report for April 27 showed an increase in both short and long positions, but the latter turned out to be more, which caused overall non-commercial positions to increase. This suggests that players actively buy the euro and one can bet that the pair will strengthen even more after the downward correction. The Federal Reserve's decision on interest rates and monetary policy did not significantly affect the US dollar rate, as well as the next programs proposed by US President Joe Biden to stimulate economic growth in the near future through changes in the tax system. Given that the Fed will continue to adhere to the previous course, even despite the sharp economic jump, risky assets will still be in demand after the decline in the EUR/USD pair earlier this month.

The COT report indicated that long non-commercial positions sharply jumped from 197,137 to 200,415, while short non-commercial positions rose from 116,329 to 119,448, indicating an influx of new buyers that expect the euro to continue rising. The more the euro corrects to the downside at the beginning of this month, the stronger the demand is. As a result, the total non-commercial net position sharply rose from 80,808 to 80,967. The weekly closing price continued to rise to 1.20795 from 1.2042 a week earlier.

The downward correction may continue even further after stop orders were removed from the bears that entered short positions last week. Therefore, the bulls need to defend the 1.2043 support. Forming a false breakout there will be a signal to open long positions in continuing the upward trend that was formed yesterday. The lack of important fundamental reports this morning can help with this. Also, the bulls need to think about regaining the 1.2074 level. A breakthrough and consolidation above this range with a reverse test from top to bottom generates a signal to open new long positions in hopes of continuing the upward trend in the area of a new high like 1.2111, where I recommend taking profits. The next target will be the 1.2148 level, but one can hardly bet on such an active growth without good macroeconomic reports from the eurozone. If the bulls are not active during the first half of the day, then we can expect EUR/USD to fall. In this case, I recommend opening long positions only if a false breakout is formed in the area of 1.2016, which creates a good entry point for longs with the main goal of returning to the 1.2043 level. But I recommend buying EUR/USD immediately on a rebound from a new local low at 1.1979, counting on an upward correction of 20-25 points within the day.

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EUR/USD: plan for the European session on May 4. COT reports. There may be problems with the euro's growth. Buyers hit resistance at 1.2074

To open short positions on EUR/USD, you need:

The bears will struggle to take control of the intermediate support level of 1.2043, which may become the middle of the horizontal channel in the near future. Therefore, only a breakthrough and test of this level from the bottom up can create a signal to sell the euro in order to continue the downward trend towards the week's low at 1.2016, which is also the lower border of the current horizontal channel. Surpassing this range will certainly increase pressure on the euro, and a reverse test of this level will push the pair even lower to the 1.1979 area, where I recommend taking profits. If we observe an upward correction in the first half of the day, then it is best not to rush to sell: forming a false breakout in the resistance area of 1.2074 creates a new signal to sell the euro as we aim for a succeeding downward correction. If bears are not active at this level, then I recommend postponing short positions immediately to rebound from a large resistance at 1.2111, counting on a downward correction of 20-25 points within the day.

Indicator signals:

Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the market following yesterday's upward correction.

Moving averages

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.

Bollinger Bands

Surpassing the lower boundary of the indicator in the area of 1.2043 will increase the pressure on the pair. Growth will be limited in the area of the upper border of the indicator in the area of 1.2074.

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.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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