To open long positions on EUR/USD, you need:
Yesterday, good signals for entering the market were formed only in the first half of the day. In my morning run, I paid attention to several support levels in the area of 1.1797 and 1.1780. Let's look at the 5-minute chart and talk about what happened. Having failed to rise above yesterday's highs, the European currency quickly fell below the support of 1.1797, which led to a larger sell-off in the area of 1.1780. Several false breakouts were formed from this level in the first half of the day, which resulted in forming signals for opening long positions.
During the US session, despite the strong data on the US consumer confidence indicator, the euro rose against the dollar, but it was not possible to achieve normal entry points into the market, since the upward movement was very fast. The growth occurred against the background of the release of the forecast from the International Monetary Fund, in which the prospects for global economic recovery for 2021-2022 were revised for the better.
Today, traders will wait for the results of the Federal Reserve meeting. Most likely, the committee will leave the current monetary policy unchanged, which may strengthen the European currency, because the market has already taken such a scenario into account. Important fundamental data will not be released in the first half of the day, so it is necessary to pay attention only to the report on the leading index of the consumer climate in Germany. Given that the euro bulls did not manage to rise above the upper limit of the horizontal channel at 1.1830 yesterday, today's entire focus will shift to this level. Consolidating and testing this area from top to bottom will create a signal to open long positions in continuation of the upward correction, counting on growth to 1.1874. The 1.1904 area is still the long-term goal, where I recommend taking profits. In case EUR/USD falls during the European session and weak data on Germany, I recommend not to rush into long positions. Forming a false breakout in the area of 1.1808 will result in creating an entry point into long positions. There are also moving averages that play on the side of euro bulls. If there is no bull activity at this level, I advise you to wait for the update of the larger lows of 1.1789 and 1.1771, from where you can buy the pair immediately for a rebound, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears risk losing all their positions and missing the resistance of 1.1830, going beyond which will lead to a reversal of the downward trend observed since the beginning of this month. Much will depend on the results of the Fed meeting. If Fed Chairman Jerome Powell hints at reducing the asset purchase program in the near future, the pressure on the euro will return. But first, during today's European session, the bears need to carefully think about protecting the resistance of 1.1830. The formation of a false breakout there and a weaker than expected report on Germany - all this creates a signal to open short positions in hopes of continuing the bearish trend. An important target will be the support of 1.1808, which acts as the middle of the horizontal channel. There are also moving averages there. Consolidating below this range and testing it from the bottom up will create a good signal to open additional short positions in hopes that EUR/USD would fall to the lows of 1.1789 and 1.1771. A more distant target will be the area of 1.1753, which is the lower border of the horizontal channel. So I advise you to take profit. However, we can only count on such a large drop in the pair following the results of the Fed meeting. In case EUR/USD grows during the European session and the bulls are not active at the level of 1.1830, it is best to postpone short positions until the test of a larger resistance of 1.1849, but even there it is possible to open short positions only after the formation of a false breakout. I advise you to sell the pair immediately for a rebound based on a downward correction of 15-20 points only from the high of 1.1874.
I recommend for review:
The Commitment of Traders (COT) report for July 20 continued to observe the market bias towards sellers of risky assets. Long positions contracted and short positions rose, which caused overall positive net position to decrease. Last week's European Central Bank meeting dampened sentiment among euro bulls, as it became clear to everyone that the central bank would not rush to tighten monetary policy and would maintain an emergency bond buying program for as long as possible to spur inflationary growth to reach its new target of 2.0%. The situation is the opposite in America. US inflation has long gone beyond the target value, and many representatives of the Federal Reserve point to the need to abandon super-soft stimulus measures in the near future, which plays on the side of the dollar. And no matter how the US 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 we will receive the FOMC decision on the main interest rate, which could strengthen the position of the US dollar if management seriously considers the issue of cutting the bond purchase program in the fall of this year. But the lower the euro falls, the higher the demand for it will be in the medium term, since the appeal of risky assets is not going anywhere. The COT report indicated that long non-commercial positions fell from 212,851 to 208,669, while short non-commercial positions rose from 153,138 to 162,847 US GDP for the second quarter of this year, where growth is expected at once by 8.4%. It could also provide a powerful bullish momentum for the US dollar. The total non-commercial net position decreased from 59,713 to 45,822. The weekly closing price declined from 1.1862 to 1.1791.
Trading is carried out just above the 30 and 50 moving averages, which indicates an attempt by the bulls to regain 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.
Surpassing the upper border of the indicator in the area of 1.1849 will lead to a new wave of euro growth. In the event of a decline, support will be provided by the lower border of the indicator in the area of 1.1789.
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.