In my morning forecast, I pointed out the level of 1.0689 and planned to make decisions regarding market entry based on it. Let’s take a look at the 5-minute chart and analyze what happened there. The rise and the formation of a false breakout led to a signal to sell the euro, resulting in a pair’s decline of more than 30 points. The technical picture was slightly revised for the second half of the day.
To open long positions on EUR/USD, the following is required:
Fairly good data on activity within the eurozone in April this year prompted purchases of the European currency. However, as you can see on the chart, traders seized this moment and quickly took profit from the entire rise, maintaining chances for further euro decline even after the release of US statistics. By the way, the same data is expected for the eurozone. Growth in the manufacturing sector’s business activity index, the services sector’s business activity index, and the composite PMI index, as well as decent results in terms of new home sales volume in the primary market, will all contribute to returning to the development of the bearish market. So, be extremely cautious with euro purchases. In the event of a pair’s decline, the formation of a false breakout around 1.0659 would be suitable for buying, counting on another attempt to rise to 1.0689. However, only a breakout and a new high-to-low move within this range will strengthen the pair with a chance of a surge to 1.0726. The ultimate target will be a maximum of 1.0754, where I’ll take profit. In the case of EUR/USD’s decline and lack of activity around 1.0659, where the moving averages are located, playing on the buyers’ side, pressure on the euro within the bearish trend framework will return. I will enter the market only after the formation of a false breakout around the next support at 1.0627 – the intermediate level. I plan to open long positions immediately on the rebound from 1.0601 with a target of a 30-35 point intraday upward correction.
To open short positions on EUR/USD, the following is required:
Euro sellers, despite the pair’s rise, still have every chance of further decline. For this, it would be good for them to regain control over 1.0659, but the formation of a false breakout around the resistance of 1.0689, similar to what I discussed earlier, will also be suitable. This will be an excellent scenario for entering short positions, and a breakout and consolidation below 1.0659, along with a reverse bottom-up test, will provide another selling point with the pair moving towards 1.0627, returning the bearish trend. There, I expect more active participation from major buyers. The ultimate target will be a minimum of 1.0601, where I’ll take a profit. In the event of EUR/USD’s upward movement in the second half of the day, as well as the absence of bears at 1.0689, which cannot be ruled out after weak US statistics, bulls will try to continue the correction. In this case, I’ll postpone sales until testing the next resistance at 1.0726. I’ll also sell there, but only after an unsuccessful consolidation. I plan to open short positions immediately on the rebound from 1.0754, with a target of a 30-35 point downward correction.
In the COT report (Commitment of Traders) for April 16th, there was an increase in both long and short positions. Obviously, after the European Central Bank meeting and the dovish tone of its policymakers, as well as after the latest inflation data in the US, which continued to rise, it isn’t easy to imagine that buyers of the European currency will show activity in the near future. Obviously, the higher the chances of maintaining a tough stance by the Federal Reserve, the stronger the US dollar will become against a number of other world currencies. For this reason, I bet on the further development of the bullish trend for the US dollar and the decline of the euro. The COT report indicates that long non-commercial positions increased by 3,493 to 178,912, while short non-commercial positions jumped by 23,992 to 166,688. As a result, the spread between long and short positions increased by 226.
Indicator signals:
Moving Averages
Trading is conducted around the 30 and 50-day moving averages, indicating a sideways market.
Note: The period and prices of moving averages considered by the author are on the hourly H1 chart and differ from the general definition of classic daily moving averages on the daily D1 chart.
Bollinger Bands
In case of a decline, the lower boundary of the indicator, around 1.0645, will act as support.
Indicator Descriptions:
- Moving average (determines the current trend by smoothing out volatility and noise). Period – 50. Marked in yellow on the chart.
- Moving average (determines the current trend by smoothing out volatility and noise). Period – 30. Marked in green on the chart.
- MACD indicator (Moving Average Convergence/Divergence). Fast EMA – period 12. Slow EMA – period 26. SMA – period 9.
- Bollinger Bands. Period – 20.
- Non-commercial traders – speculators, such as individual traders, hedge funds, and large institutions, 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 positions of non-commercial traders.
- The net non-commercial position is the difference between the short and long positions of non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com
