EUR/USD: plan for the European session on May 25. COT reports. Euro bulls don't give up hope of going beyond the 1.2243 high

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

Several signals to enter the market were formed yesterday. Let's take a look at the 5-minute chart and analyze the trades. In the first half of the day, amid an absence of important fundamental reports, euro bulls managed to surpass the level of 1.2205. A breakthrough with consolidation above the resistance of 1.2205 and its reverse test from top to bottom created a good signal to open long positions as the pair continues to rise. However, it failed to significantly rise the first time. Several more similar tests of the level of 1.2205 took place in the afternoon, and after that the euro went up by about 25 points, but we did not reach the key target in the area of 1.2243.

Before talking about further prospects for the EUR/USD movement, let's see what happened in the futures market and how the Commitment of Traders positions have changed. The Commitment of Traders (COT) report for May 18 revealed that both short and long positions increased, but this time there were more bulls, which caused overall non-commercial positions to rise. Last week, everyone was waiting for economic indicators for the eurozone, namely data on inflation and GDP growth rates. The reports were in line with economists' forecasts, which made it possible for the euro to at least maintain the pair's upward potential. The release of the minutes of the Federal Reserve meeting pushed risky assets to fall, as there were ghostly hints among the committee members about the curtailment of the bond purchase program. However, the next day the entire fall was won back. By the end of the week, the pressure on the euro returned after European Central Bank President Christine Lagarde said that it was not time to roll back stimulus support in the eurozone. The data released over the past week did not worry traders much, since all the attention is now focused on the monetary policy of central banks. Apparently, only the news that the Fed is seriously going to reduce the volume of purchases of bonds can lead to a serious growth of the US dollar. Until then, with each decline from the pair, the demand for risky assets will return, which will help the euro in the short term and further renew its monthly highs. The COT report indicated that long non-commercial positions jumped from 223,387 to 232,330, while short non-commercial positions rose from 129,480 to 132,472. This indicates an influx of new buyers in hopes that the euro will continue to rise, however with each renewal of the high, there are more and more people willing to sell. The total non-commercial net position rose from 93,907 to 99,858. The weekly close also increased from 1.21406 to 1.21564.

Euro bulls coped with their task and brought back the level of 1.2205 under control, having beaten off all yesterday's attempts to take back this range. Today, the euro may continue to strengthen, but for this we should be pleased with the good fundamental reports on GDP growth in Germany and the indicator of the business environment from the IFO Institute for May this year. The report should surpass economists' forecasts. In this case, buyers will aim for resistance at 1.2243 during the European session. A breakthrough and test of this area from top to bottom can create a point of entry into long positions in continuation of the upward trend, counting on the renewal of the next monthly high to the area of 1.2294, where I recommend taking profits. The next target will be the 1.2347 level. A more optimal scenario for long positions would be a downward correction of EUR/USD to the support area of 1.2205, where the moving averages, playing on the side of the bulls, pass. Forming a false breakout there will be a good entry point into long positions, expecting the continuation of the bull market. In case we receive weak data for the eurozone and the bulls are not active in the support area of 1.2205, you can safely open short positions from a large low in the 1.2163 area, or even lower - in the 1.2103 area, counting on an upward correction of 15-20 points within the day. If the bulls fail to get out of the resistance at 1.2243 today, trading will continue in the wide horizontal channel at 1.2163-1.2243, which suits me perfectly, since the signals obtained from these levels are simply excellent.

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

The bears will fight to regain control of the market, and for this it is necessary to protect the large resistance at 1.2243, which the bulls are currently aiming for. Forming a false breakout there creates a new signal to sell the euro in hopes of falling to the area of the middle border of the horizontal channel at 1.2205, where the moving averages are located, playing for the bulls. Surpassing this level will pull the pair into a downward correction, which will limit the succeeding bull market, at least temporarily. An equally important task will be to settle below the 1.2205 range. Bad fundamental data on the recovery of the German economy in the first quarter of this year and the update of the 1.2205 level from the bottom up can create an additional signal to sell the euro in order to return to the lower border of the horizontal channel at 1.2163, where I recommend taking profit. The next target will be the low of 1.2103, but such a scenario is hardly possible without serious market shocks. If the bears are not active in the area of 1.2243 this morning, I recommend postponing short positions immediately to a rebound from a large resistance at 1.2294, counting on a downward correction of 15-20 points. The next serious level is at the new local high in the area of 1.2347.

Indicator signals:

Trading is carried out above 30 and 50 moving averages, which indicates that the growth will continue.

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 1.2230 will lead to a new wave of euro growth. Surpassing the lower border of the indicator in the area of 1.2205 will increase the pressure on the pair.

Description of indicators