To open long positions on EUR/USD, you need:
Despite the fact that the European Central Bank has revised its attitude to interest rates, stating that it will keep them at zero level for a very long time, the euro has not reacted strongly to this, although more pressure was expected to form. The pair continued to trade in a horizontal channel. Now let's take a look at the 5 minute chart and understand the trades. During the European session, the bulls successfully protected the support at 1.1783. A false breakout at this level resulted in creating a signal to open long positions. But as you and I can see on the chart, there was no major growth before the ECB announced its decision. Upward movement by 15 points and complete calm.
Following the announcement of the ECB's monetary policy decision and ECB President Christine Lagarde's press conference, the euro has been tossed from side to side several times. The formation of a false breakout in the area of resistance at 1.1825 resulted in creating a good signal to open short positions, which quickly pushed the pair to the lower border of the horizontal channel in the area of 1.1763, allowing about 50 points to be taken from the market.
Today we are waiting for a fairly large series of data on activity in the eurozone and the United States. Manufacturing and services index reports may support the euro in the morning. Therefore, the bulls will focus on the support level of 1.1758, which is also the lower border of the current horizontal channel, which the bears have been knocking on all this week. Only good data on the growth of activity in the eurozone and the next false breakout at this level can create a signal to open long positions in order to restore EUR/USD to the intermediate resistance of 1.1780. Consolidating and testing this area from top to bottom creates another signal for you to open long positions in continuation of the upward correction and counting on a growth to 1.1804. The next target is the upper border of the horizontal channel at 1.1829, where I recommend taking profits. In case EUR/USD falls during the European session and the bulls are not active in the support area of 1.1758, I recommend not to rush into long positions. Weak data for the euro zone will most likely lead to a breakdown of 1.1758, so long positions are best postponed until the test of a new low at 1.1740, where forming a false breakout can create a buy signal. I advise you to buy the pair immediately on a rebound only from the next major support in the 1.1715 area, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears are making every effort to break through 1.1758, but so far something has not been final. To begin with, during the European session, they need to think carefully about protecting the resistance at 1.1780. Forming a false breakout there and weaker than expected by economists data on activity in the eurozone - all this can create a signal to open short positions in hopes of continuing the bearish trend that formed yesterday after the ECB meeting. An important target will be the support at 1.1758, which acts as a kind of lower border of the horizontal channel. Whether the pair remains under the control of the bears or not will depend on its breakdown. Consolidating below this range and testing it from the bottom up can create a good signal to open additional short positions while expecting EUR/USD to fall to a low like 1.1740. The next target will be the area of 1.1715, where I recommend taking profits. If EUR/USD grows during the European session and the bulls are not active at 1.1780, it is best to postpone selling until the test of the larger resistance at 1.1804, but short positions can be opened there only after a false breakout is formed. I recommend selling the pair immediately on a rebound counting on a downward correction of 15-20 points only from a high like 1.1829.
The Commitment of Traders (COT) report for July 13 clearly showed a skew in the market towards sellers of risky assets. And although the long positions have not changed in any way, the sharp growth in short positions has caused the overall positive net position to fall. The fact that US inflation continues to grow and not only Federal Reserve Chairman Jerome Powell, but also US President Joe Biden, speaks about it, indicates the seriousness of the situation. And no matter how the central bank tries to convince investors that this is just a temporary phenomenon, the market continues to abandon risky assets in favor of safe haven assets, which is the US dollar. This week, the picture can only get worse, as the European Central Bank will hold a meeting on Thursday. At it, politicians will announce a new mandate regarding the long-term rate of inflation in the eurozone, which may lead to a revision of plans for monetary policy in the near future. This will be a certain shock for the euro and it is difficult to guess what the market reaction will be. But the lower the euro falls, the higher the demand for it will be in the medium term, since the appeal of risky assets has not gone away. The COT report indicates that long non-commercial positions remained virtually unchanged and decreased from the level of 212,998 to the level of 212,851, while short non-commercial positions increased from the level of 135,808 to the level of 153,138. In addition to the ECB's decision on Friday, we are waiting for interesting fundamental reports on the activity of the service sector and the manufacturing sector of the eurozone countries, which can definitely affect the euro's direction in the short term. The total non-commercial net position decreased from the level of 77,190 to the level of 59,713. The weekly closing price remained unchanged at 1.1862.
Trading is carried out just below the 30 and 50 moving averages, which indicates an attempt by the bears to seize control of the market.
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 breakout of the upper border of the indicator in the area of 1.1804 will lead to a new wave of euro growth. A breakout of the lower border of the indicator in the area of 1.1750 will increase the pressure on the pair.
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.