To open long positions on EUR/USD, you need:
Nothing interesting happened yesterday morning, which cannot be said about the US session. The German inflation report did not surprise traders with anything, so the volatility in EUR/USD remained at a fairly low level. The data on the consumer confidence indicator in the US, on the contrary, exceeded the forecasts of economists, which caused the euro to fall to the support area of 1.1885, where I recommended to open long positions on condition of a false breakout. The 5-minute chart clearly shows how, after the bears failed several times, the bulls successfully beat off the 1.1885 level and formed a good entry point into long positions there. As a result, the upward movement was around 25 points, which is quite good for such a low volatile market.
Today, the volatility promises to be quite high for the pair, as we expect a fairly large number of fundamental reports for the eurozone and the United States. In the first half of the day, there will be reports on the change in the number of unemployed in Germany and the overall unemployment rate, as well as data on the consumer price index in Italy and the whole of the eurozone countries. The rise in inflation above the forecasts of economists may strengthen the European currency. But the initial task is to protect the 1.1880 support. Forming a false breakout there generates a signal to open long positions in hopes that EUR/USD would rise in the area of the middle of the 1.1925 horizontal channel. It is also possible to count on a breakthrough of this level, however, I recommend opening long positions when the euro continues to grow after it has been tested from top to bottom, which creates an additional buy signal in order to return the pair to the larger resistance at 1.1974, where I recommend taking profits. The next target will be the area of 1.2032. In case the bulls are not active around 1.1880 and we receive a disappointing report on inflation in the eurozone, it is best not to rush into long positions. I advise you to wait for the 1.1850 support update. It is possible to buy EUR/USD immediately on a rebound only from a new monthly low in the 1.1805 area, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
An important task in the first half of the day will be for the pair to go beyond the support at 1.1880, as the pair could not settle below this level yesterday. Weak data on inflation in the euro area could help realize such a scenario. A test of this area from the bottom up will create a good signal to open short positions in continuation of the bear market, as we count on EUR/USD to fall to the lows of 1.1850 and 1.1805, which is where I recommend taking profits. If the euro grows in the first half of the day, an equally important task for the bears is to protect the resistance at 1.1925. Forming a false breakout there creates an entry point for short positions. If the bears are not active there, it is best to postpone short positions until the test of the upper boundary of the horizontal channel at 1.1974, where you can immediately sell the pair on a rebound, counting on a downward correction of 15-20 points. The next major selling resistance comes at the 1.2032 high.
The Commitment of Traders (COT) report June 22 showed significant changes: long positions sharply fell and short positions increased. Such changes took place after the Federal Reserve's meeting on interest rates. Let me remind you that during the last meeting, the central bank made the first hints of an earlier increase in interest rates. Some Fed members expect this kind of change as early as 2022. This suggests that in the near future the central bank may begin to wind down its bond purchase program, which will strengthen the US dollar's position on the world stage even more. However, if the European currency falls even further in the near future, then the demand for it will increase even more in anticipation of such measures from the European Central Bank, which, as we all know, has recently been following the Fed's example and with a slight delay. A number of important fundamental reports on the US labor market will be published this week, as well as many speeches by the heads of world central banks that are set to take place, which will help traders decide on the future course of monetary policy. Most likely, the trend towards the strengthening of the US dollar will continue this week, but it will be more and more difficult for the bears to pull down the pair. The COT report indicates that long non-commercial positions fell from 210,816 to 207,863, while short non-commercial positions rose from 92,630 to 118,806. It should be understood that the latest data on activity in the euro manufacturing sector and the service sector indicated that the eurozone economy is on track for strong growth in the summer, which will necessarily affect the prospects for its recovery after the coronavirus pandemic. This is the key to a medium-term upward trend in the European currency. The total non-commercial net position decreased from the level of 118,186 to the level of 89,057. The weekly closing price decreased from the level of 1.2121 to the level of 1.1912.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates a sideways market with a slight advantage for the bears.
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 border of the indicator in the area of 1.1885 will increase pressure on the euro. A breakthrough of the upper border of the indicator around 1.1920 will lead to a new wave of growth for the euro.
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.
