To open long positions on EUR/USD, you need:
Yesterday there were a lot of signals to enter the market, but the second half of the day was more profitable than the first. Let's take a look at the 5 minute charts and understand the entry points.
The eurozone inflation report was released during the European session, which traders ignored, as it fully coincided with economists' forecasts. Most likely, market participants were counting on a more active rise in consumer prices, since we saw the euro fall to the support area of 1.2214 after the report was published, where the bulls did not show much interest. Forming a false breakout there created a signal to open long positions, but the bulls were not active. In the best case, you could go to zero.
But in my afternoon forecast, I advised you to rely on a new level (1.2199) and make decisions from it. We could see how, when falling into this range, the bulls formed a false breakout, which resulted in creating a good entry point into long positions. The upward movement was about 40 points, which made it possible to compensate for the losses after the first unsuccessful entry and so you could make good money. The euro surpassed the 1.2199 level after the Federal Reserve's minutes was published, and its reverse test from the bottom up created a new entry point for short positions, which pushed the euro to fall by more than 35 points.
We can hardly count on the euro to strengthen today, especially after yesterday's hints from the Fed that the program for buying bonds could be curtailed in the near future. Euro bulls in the course of the European session will most likely aim to return to resistance at 1.2199. Only a breakthrough and test of this area from top to bottom can create a new entry point to long positions in continuation of the upward trend and only then can we count on a renewal of the monthly high to the 1.2242 area, where I recommend taking profits. The next target will be the area of 1.2294, but it will not be so easy to get to this level after yesterday's news. A more optimal scenario for buying will be a downward correction to the support area of 1.2153. Forming a false breakout there will be a good entry point into long positions in hopes of stopping the intraday bearish trend and restoring the pair to the resistance area of 1.2199, where the moving averages are passing, limiting its upward potential. In case we receive weak data on German producer prices and the eurozone balance sheet, as bulls are not active in the support area of 1.2153, then it is best to postpone short positions until a new large low in the 1.2103 area is renewed, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears will fight to keep the market under their control. To do this, they need to defend the level of 1.2199, which was broken yesterday after the Fed minutes was released. Forming a false breakout there, where the moving averages are, creates a new signal to sell the euro in order for it to fall to the support area of 1.2153. A succeeding downward correction will depend on this level. Therefore, its breakthrough and test from the bottom up creates an additional entry point for short positions for the purpose of falling to the level of 1.2103, where I recommend taking profits. If the bears are not active at the level of 1.2199 today in the first half of the day, then I recommend postponing short positions immediately to a rebound from the large resistance at 1.2242, beyond which we did not succeed yesterday. You can sell the euro from there as we count on a downward correction of 15-20 points. The next resistance is only at the new local high in the area of 1.2294.
The Commitment of Traders (COT) report for May 11 revealed that both short and long positions have increased, but this time there were more buyers, which caused the overall non-commercial position to rise. Last week, everyone was waiting for the US inflation report, which set the tone. Its sharp rise only provided temporary support to the US dollar, but traders managed to take advantage of this moment to open long positions after the EUR/USD pair corrected downward. Apparently, news that the Federal Reserve is going to raise interest rates is the only thing that can push the dollar to significantly rise. Until then can the demand for risky assets prevail, which will help the euro in the short term and further renew its monthly highs. The COT report indicated that long non-commercial positions jumped from 206,472 to 223,387, while short non-commercial positions rose from 121,643 to 129,480. This indicates an influx of new buyers that expect the euro's growth, however with each renewal of the highs, there are more and more people willing to sell. The total non-commercial net position rose from 84,829 to 93,907. The weekly closing price also increased significantly from 1.20591 to 1.21406.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates a possible formation of a downward correction in the pair.
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 upper border of the indicator in the area of 1.2230 will lead to a new wave of euro growth. Surpassing the lower border of the indicator in the area of 1.2153 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.
