To open long positions on EUR/USD, you need:
Despite receiving a number of important fundamental statistics on the eurozone last Friday, the pair did not go beyond the horizontal channel, however, euro bulls managed to protect the support at 1.1758, which is a good signal for an upward correction. In the morning forecast, I drew attention to the 1.1780 level and advised you to open short positions from it when a false breakout was formed. Everything exactly coincided with the forecast: the bears successfully defended the level, which weighed on the euro. However, we did not see a strong sell-off due to the fundamental data on the eurozone.
In the second half of the day, the bulls managed to form a false breakout in the support area of 1.1758, which resulted in forming a signal to buy the euro, but failed to rise above the middle of the 1.1784 horizontal channel.
This morning, the focus should be on the IFO German Business Environment Indicator Report. We expect to see growth from this indicator, which may strengthen the euro, however, the bulls will focus on 1.1758, which is the lower border of the current horizontal channel. Only good data on the growth of conditions in the business environment, which should exceed the forecasts of economists and the next formation of a false breakout at this level, can create a signal to open long positions in order to restore EUR/USD to the middle of the 1.1784 horizontal channel. Consolidating and testing this area from top to bottom can create another signal to open long positions in continuation of the upward correction and count on growth to 1.1807. The next target is the upper border of the horizontal channel at 1.1829, where I recommend taking profits. In case EUR/USD falls during the European session and the bulls are not active in the support area of 1.1758, I recommend not to rush into long positions. Weak data for the eurozone will most likely lead to a breakdown of 1.1758, so long positions are best postponed until the test of a new low at 1.1740, where a false breakout can create a buy signal. I advise you to buy the pair immediately on a rebound only from the next major support in the 1.1715 area, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
The bears' case, although they try to put pressure on the euro at every opportunity, as was the case on Friday amid weak data on activity in the eurozone countries, but so far something is not going well. They are unable to break through the area below the level of 1.1758. For starters, in today's European session, they need to think hard about protecting the resistance at 1.1784. Forming a false breakout there and a weaker than expected report on conditions in the German business environment - all this forms a signal to open short positions in hope of continuing the bearish trend formed after the European Central Bank's meeting last week. The support at 1.1758 will be an important target, which acts as a kind of lower border of the horizontal channel. Whether the pair remains under the control of the bears or not depends on its breakdown. Consolidating below this range and testing it from the bottom up can create a good signal to open additional short positions in hopes that EUR/USD would fall to a low like 1.1740. The next target will be the area of 1.1715, where I recommend taking profits. If EUR/USD grows during the European session and the bulls are not active at 1.1784, it is best to postpone selling until the test of the larger resistance at 1.1807, but short positions can be opened there only after a false breakout is formed. I recommend selling the pair immediately on a rebound counting on a downward correction of 15-20 points only from a high of 1.1829.
I recommend for review:
The Commitment of Traders (COT) report for July 13 clearly showed a skew in the market towards sellers of risky assets. And although the long positions have not changed in any way, the sharp growth in short positions has caused the overall positive net position to fall. The fact that US inflation continues to grow and not only Federal Reserve Chairman Jerome Powell, but also US President Joe Biden, speaks about it, indicates the seriousness of the situation. And no matter how the 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, the picture can only get worse, as the European Central Bank will hold a meeting on Thursday. At it, politicians will announce a new mandate regarding the long-term rate of inflation in the eurozone, which may lead to a revision of plans for monetary policy in the near future. This will be a certain shock for the euro and it is difficult to guess what the market reaction will be. But the lower the euro falls, the higher the demand for it will be in the medium term, since the appeal of risky assets has not gone away. The COT report indicates that long non-commercial positions remained virtually unchanged and decreased from the level of 212,998 to the level of 212,851, while short non-commercial positions increased from the level of 135,808 to the level of 153,138. In addition to the ECB's decision on Friday, we are waiting for interesting fundamental reports on the activity of the service sector and the manufacturing sector of the eurozone countries, which can definitely affect the euro's direction in the short term. The total non-commercial net position decreased from the level of 77,190 to the level of 59,713. The weekly closing price remained unchanged at 1.1862.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, and now it is difficult to figure out which side the market will swing.
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 upper border of the indicator in the area of 1.1784 will lead to a new wave of euro growth. A breakthrough of the lower border of the indicator in the area of 1.1758 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.
