To open long positions on EUR/USD, you need:
No matter how hard the euro bulls try to cling to the market, active selling in the second half of the day breaks the prospects for the euro's further recovery. Several signals to enter the market were formed yesterday. Let's take a look at the 5 minute chart and break down the trades. In my forecast, I drew attention to the 1.1888 level and the high probability of a false breakout there in the afternoon. This is the scenario that led to the formation of a signal to sell the euro. After the release of US reports, the pair quickly fell to the support area of 1.1866, where the bulls tried to regain control over the market, but it did not work out very well. A fairly large number of fundamental reports on the eurozone economy will be released today. The main focus of traders will shift to reports on the PMI in the services sector of the EU countries. It is expected that many July indicators will remain unreconsidered and coincide with the preliminary estimate, which may put pressure on the European currency in the first half of the day, as the bulls will have nothing to cling to until the end of the week.
Now the bulls will focus on the resistance at 1.1886, above which it was not possible to break through once again yesterday. This calls into question the ability of the bulls to take further action at current local highs. Only a reverse test of the 1.1886 area from top to bottom will generate a signal to open long positions with the expectation of a return to the upper border of the horizontal channel at the bottom of the 19th figure, which was created at the end of last week. Only a breakthrough of this range will hit a series of bears' stop orders, opening a direct path to the larger resistance at 1.1937, where I recommend taking profits. In case EUR/USD falls during the European session and weak data for the eurozone, I recommend not to rush into long positions. Forming a false breakout in the 1.1855 area, which has already saved the bulls from a fiasco several times, will lead to creating a new entry point to long positions in order to continue the upward trend. If the bulls are not active at this level, I advise you to wait for the update of the next large low at 1.1827, or buy the pair immediately on the rebound from 1.1799, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears managed to cope with the task yesterday and did not let the pair go above the resistance of 1.1888, which today transformed into 1.1886. Trading is carried out in the area of moving averages, which is still more indicative of the sideways nature of the market. The direction of the pair in the first half of the day will depend on the data from the eurozone and it is likely that the bulls will make another attempt to rise, so the bears need to think carefully about protecting the resistance at 1.1886. Forming a false breakout there and a weaker than expected report on activity in the service sector and the composite PMI of the eurozones - all this forms a signal to open short positions in hopes of a further downward correction to the support area of 1.1855. The next target for the bears will be to break and retest this range, pushing EUR/USD quickly to the 1.1827 low. The next target will be 1.1799, where I advise you to take profits. If EUR/USD grows during the European session and the bulls are not active at 1.1886, it is best to postpone selling until the test of the larger resistance at 1.1908, which is also the upper border of the current horizontal channel. You can also open short positions there only after the formation of a false breakout. I advise to sell the pair immediately on a rebound counting on a downward correction of 15-20 points only from a high like 1.1937.
The Commitment of Traders (COT) report for July 27 continued to observe the market bias towards sellers of risky assets. Long positions contracted and short positions increased, which caused the overall net position to decrease. The results of the Federal Reserve meeting indirectly influenced the euro's direction, but given the committee's wait-and-see position, there are fewer people willing to buy the US dollar. The data on GDP in the US and the eurozone were quite different: in the US, the report fell short of the forecasts of economists, and in the eurozone, on the contrary, the indicator turned out to be better than forecasted, which pushed the euro to rise. However, this fact is no longer taken into account in the current COT report, so it seems that the balance of power remains on the side of the bears. The COT report indicates that long non-commercial positions fell from 208,669 to 202,245, while short non-commercial positions rose from 162,847 to 164,119. At the end of the week we can expect to receive important fundamental reports on the change in the number of employees in the non-agricultural sector of the United States of America,which can significantly affect the direction of the EURUSD pair. The strong data will provide a strong bullish momentum for the US dollar, which will strengthen its position, as the Federal Reserve continues to cite a weak recovery in the labor market in its forecasts. The total non-commercial net position decreased from 45,822 to 38,126. But the weekly closing price increased slightly from 1.1791 to 1.1804.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the market.
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
In case of growth, the upper border of the indicator in the area of 1.1890 will act as a resistance. In case of a decline in the pair, support will be provided by the lower border at 1.1855.
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.
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