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FX.co ★ EUR/USD: plan for the US session on May 4 (analysis of morning trades)

EUR/USD: plan for the US session on May 4 (analysis of morning trades)

To open long positions on EURUSD, you need to:

Expectations that the pressure on the euro will continue today in the first half of the day were justified. It is what I emphasized in my morning forecast. Let's look at the 5-minute chart and talk about what happened. As you can see, it was not possible to wait for a false breakout from the level of 1.2043, and the pair quickly went further down, continuing its Asian trend. The lack of important fundamental statistics helped in this. The formation of a false breakout at the level of 1.2016, where a buy signal was formed, brought only losses since there was no major upward movement after returning to 1.2016. Now the trade has moved back to 1.2016, so I had to revise the strategy for the second half of the day.

EUR/USD: plan for the US session on May 4 (analysis of morning trades)

Buyers of the European currency will try to protect the support of 1.2500. Only the next formation of a false breakdown (by analogy with the morning purchase, which was not realized) will lead to a signal to open long positions in the expectation of an upward correction to the resistance of 1.2035. In the second half of the day, we will see statistics on the US foreign trade balance and changes in the volume of production orders. Weak reports, together with the speech of FOMC member Mary Daly, may put pressure on the US dollar, which will lead to a rise in the euro. In this scenario, only a break and consolidation above the resistance of 1.2035 with a reverse test of it from top to bottom will form an additional signal to open long positions in the expectation of an upward correction to the area of the maximum of 1.2074, where I recommend taking the profits. If the pressure on EUR/USD continues in the second half of the day, and the bulls do not show any activity in the area of 1.2500, I recommend postponing long positions until the update of a larger minimum of 1.1964, from where you can buy the euro immediately on the rebound in the expectation of an upward correction of 20-25 points within the day.

To open short positions on EURUSD, you need to:

The bears coped with the first task – they continued the downward Asian correction, which resulted in new euro sales. The main task of sellers for the second half of the day is to break through the support of 1.251. Only a reverse test of this level from the bottom up will form an entry point into short positions to reach the minimum of 1.1964, where I recommend fixing the profits. The more distant target is the area of 1.1925. If the US data disappoints investors and we will see the growth of EUR/USD during the US session: you can count on short positions only in the area of the morning resistance of 1.2035. The formation of a false breakout will be a signal to sell the euro. If the bears do not show activity in the area of 1.2035, and the bulls will be able to take this range – it is best to abandon sales before the EUR/USD reaches a new local maximum in the area of 1.2074. You can immediately sell the euro from this level on a rebound with the expectation of a downward correction of 20-25 points within the day.

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EUR/USD: plan for the US session on May 4 (analysis of morning trades)

Let me remind you that the COT report (Commitment of Traders) for April 27 showed an increase in both short and long positions, but the latter turned out to be more, which led to an increase in the overall non-commercial position. It suggests that active purchases of the euro by the players continue, and you can bet on further strengthening of the pair after a downward correction. The Federal Reserve's decisions on interest rates and monetary policy did not significantly affect the US dollar, as did 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 stick to the same course, even despite the sharp economic jump, it is likely that demand for risky assets will continue after the decline of the EUR/USD pair earlier this month. The COT report shows that long non-profit positions jumped sharply from 197,137 to the level of 200,415.

In contrast, short non-profit positions rose from 116,329 to the level of 119,448, indicating an influx of new buyers in the expectation of continued growth of the euro. The more the euro is adjusted downwards at the beginning of this month, the stronger the demand will be. As a result, the total non-profit net position rose sharply from the level of 80,808 to the level of 80,967. The weekly closing price continued its growth to 1.20795 from the level of 1.2042 a week earlier.

Signals of indicators:

Moving averages

Trading is conducted below 30 and 50 daily moving averages, which indicates a continued decline in the euro.

Note: The period and prices of the moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.

Bollinger Bands

In the case of an upward correction of the pair in the second half of the day, the average border of the indicator in the area of 1.2040 will act as a resistance.

Description of indicators

  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
  • MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet specific 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 the 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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