EUR/USD: plan for the European session on July 28. COT reports (analysis of yesterday's trade). Euro's rapid growth gradually

To open long positions on EUR/USD, you need:

Yesterday, we observed how the European currency continued to strengthen after the release of good fundamental data on the volume of orders for durable goods in the US, where the figure was better than economists' expectations, pointing to continued recovery of the US economy. If you look at the 5-minute chart, in addition to the first signal to buy the euro, which formed in the European session, you can see how after the breakout and consolidation above the resistance of 1.1718, the bulls also created a good point to open long positions in order to continue the euro's growth. The first test of the 1.1750 level caused the pair to go down.

The Commitment of Traders (COT) reports also indicates that the euro's sharp growth and investors' interest in it will continue. The COT reports for July 21 recorded a sharp increase in long positions and a reduction in short ones, which tells us about the return of investors' interest in risky assets amid the confusion that is happening in the US due to the coronavirus, the presidential election and the fall in Treasury yields. The report shows an increase in long non-commercial positions from 194,252 to 204,185, while short non-commercial positions decreased from 83,340 to 79,138. As a result, the positive non-commercial net position increased to 125,047, against 110,912, which indicates an increase in interest in buying risky assets even at current high prices.

As for today's intraday strategy, there are signs of a slowdown in the bull market and a correction forming. To save the situation, buyers need to form a false breakout in the support area of 1.1729, which will be a signal to open long positions, expecting to continue the upward trend. However, a more important goal will be a breakout and consolidation at the resistance of 1.1772, which almost coincides with this week's high. Only then can we expect an update of the 18-0th figure and a test of the 1.1830 level, where I recommend taking profits. If buyers are not in a hurry to enter the market near the support of 1.1729, and most likely it will be amid a lack of fundamental data in the first half of the day, it is best to defer short positions to update 1.1688, or to buy the euro immediately on the rebound from the 1.1640 support based on a correction of 25-30 points intra-day.

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To open short positions on EUR/USD, you need:

Sellers need to be more active, especially given the fact that the hourly chart forms a divergence on the MACD indicator. Forming a false breakout in the 1.1772 area or a resistance test of 1.1802 with the continuation of divergence will be the first signal to open short positions while expecting the euro to sharply decline by the middle of this week. If bears are not active in the area of the 18th figure, it is best to postpone sales until the larger area of 1.1830 is updated, or to rebound from the high of 1.1866, based on a correction of 30-40 points within the day. An equally important task for the bears is to break through and consolidate below the 1.1729 support. Along with weak fundamental data on consumer confidence in the US, EUR/USD could significantly adjust to the area of lows at 1.1688, where the 50-day moving average passes, and 1.1640, where I recommend taking profits.

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Indicator signals:

Moving averages

Trading is carried out in the area of 30 and 50 moving averages, which indicates that a downward correction will form in the short term.

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

A breakout of the lower border of the indicator in the area of 1.1715 will increase pressure on the euro. A breakout of the upper border in the 1.1772 area will lead to a new wave of euro growth.

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) Fast EMA period 12. Slow EMA period to 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-commercial traders are speculators, 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.
  • The total non-commercial net position is the difference between short and long positions of non-commercial traders.
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