In my morning forecast, I pointed out the level of 1.0688 and planned to make decisions based on it for market entry. Let’s take a look at the 5-minute chart and analyze what happened there. The decline and the formation of a false breakout led to a signal to buy euros. However, significant pair growth did not materialize, prompting an exit from the market and a review of the technical picture.
For opening long positions on EUR/USD:
The data released in the first half of the day from Germany managed to please traders, which allowed stopping the bearish market around 1.0688. However, as you can see on the chart, active buying following yesterday’s trend has yet to occur and, most interestingly, is unlikely to happen. For a more active pair decline, good data on changes in the volume of durable goods orders in the US is required, although this indicator is unlikely to have a significant impact on the currency market. Given the current challenges faced by buyers, it’s best to act as slowly as possible. In the event of further pair decline, the formation of a false breakout around 1.0666 would be suitable for purchases, with the aim of attempting growth to 1.0700 – the resistance formed during the first half of the day. However, only a breakout and a new downward movement within this range will strengthen the pair, with a chance of a surge towards 1.0726. The ultimate target will be at a maximum of 1.0754, where I’ll take a profit. In the scenario of a further EUR/USD decline and lack of activity around 1.0666, just above the moving averages playing in favor of buyers, the pressure on the euro within the bearish trend will return. In this case, I’ll enter the market only after the formation of a false breakout around the next support level of 1.0627 – the intermediate level. I plan to open long positions immediately on the rebound from 1.0601 with the aim of an ascending correction of 30–35 points within the day.
For opening short positions on EUR/USD:
Euro sellers have every chance for further pair declines. For this, it would be nice for them to demonstrate strength around 1.0700, the test of which may occur as part of buyers’ efforts to regain control of the market even before the release of statistics. The formation of a false breakout would be an excellent scenario for entering short positions with the target of declining to around 1.0666. A breakout and consolidation below this range, together with a reverse test from bottom to top, will provide another selling point, with the pair moving towards 1.0627, which will bring back the bearish trend. I expect more active involvement from major buyers there. The ultimate target will be at a minimum of 1.0601, where I’ll take a profit. In the event of an upward movement of EUR/USD in the second half of the day, as well as the absence of bears at 1.0700, which cannot be ruled out after weak US statistics, bulls will try to continue the correction. In this case, I’ll postpone selling 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 the aim of a downward correction of 30-35 points.
In the COT report (Commitment of Traders) for April 16th, there was an increase in both long and short positions. Obviously, after the ECB meeting and the dovish tone of its policymakers, as well as after the latest inflation data in the US, which continued to rise, it’s difficult to imagine that euro buyers will be active in the near future. Obviously, the higher the chances of the Federal Reserve maintaining a tough stance, the stronger the US dollar will become against a number of other world currencies. For this reason, I bet on further development of the bullish trend for the US dollar and a decline in the euro. The COT report indicates that non-commercial long positions increased by 3,493 to 178,912, while non-commercial short 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 carried out around the 30 and 50-day moving averages, indicating a sideways market.
Note: The author considers the period and prices of moving averages on the hourly H1 chart, which differs 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 will act as support around 1.0685.
Description of Indicators:
- Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked on the chart in yellow.
- Moving average (determines the current trend by smoothing volatility and noise). Period 30. Marked on the chart in green.
- 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 total non-commercial net 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
