EUR/USD: plan for the European session on July 27. COT reports. Euro breaks through to the next resistance at 1.1816 and aims for last week's high

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

The euro continued to strengthen its positions yesterday, having formed a good signal to open long positions in the afternoon. Let's take a look at the 5 minute chart and talk about what happened. The data released in the first half of the day on the indicator of conditions for the business environment in Germany did not meet the expectations of economists, which led to a sharp decline in the euro. However, it quickly bounced back and the bulls re-consolidated above the 1.1784 range. Unfortunately, it was not possible to achieve signals to enter the market from this level during the European session, since it broke through each time (up and down). The bulls were more active in the afternoon, and after protecting the 1.1784 support, an excellent signal to open long positions was formed (I marked the entry point on the chart), which led to the pair's recovery to the area of the next resistance at 1.1807. There were no other signals to enter the market.

Before we talk about the future prospects of the EUR/USD movement, let's look at what happened on the futures market and how the positions of the Commitment of Traders (COT) changed. The COT report for July 20 continued to observe the market bias towards sellers of risky assets. Long positions contracted and short positions rose, which caused overall positive net position to decrease. Last week's European Central Bank meeting dampened sentiment among euro bulls, as it became clear to everyone that the central bank would not rush to tighten monetary policy and would maintain an emergency bond buying program for as long as possible to spur inflationary growth to reach its new target of 2.0%. The situation is the opposite in America. US inflation has long gone beyond the target value, and many representatives of the Federal Reserve point to the need to abandon super-soft stimulus measures in the near future, which plays on the side of the dollar. And no matter how the US 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 we will receive the FOMC decision on the main interest rate, which could strengthen the position of the US dollar if management seriously considers the issue of cutting the bond purchase program in the fall of this year. But the lower the euro falls, the higher the demand for it will be in the medium term, since the appeal of risky assets is not going anywhere. The COT report indicated that long non-commercial positions fell from 212,851 to 208,669, while short non-commercial positions rose from 153,138 to 162,847 US GDP for the second quarter of this year, where growth is expected at once by 8.4%. It could also provide a powerful bullish momentum for the US dollar. The total non-commercial net position decreased from 59,713 to 45,822. The weekly closing price declined from 1.1862 to 1.1791.

So far, the bulls are doing an excellent job and are gradually pulling the pair to last week's highs, which are also the upper border of the horizontal channel, in which the euro is in for the second consecutive week. There are no important fundamental reports this morning, so only the report on changes in the M3 aggregate of money supply and the volume of lending in the euro zone will attract attention. The data is unlikely to somehow affect the direction of the European currency, which leaves hope for EUR/USD bulls to break the resistance of 1.1816. Only a consolidation at this level with a reverse test from top to bottom can generate a signal to open long positions in hopes that the upward trend would continue so the pair can reach a high like 1.1831. A breakdown of this area with a similar consolidation forms an additional entry point for long positions, which will lead EUR/USD to new local levels of 1.1849 and 1.1874, where I recommend taking profits. In the event of weak data on the eurozone and a negative market reaction with longs, it is best not to rush. Long positions can be opened subject to a false breakout in the area of the intermediate support at 1.1797, below which the moving averages, playing on the side of the euro bulls, pass. I recommend buying EUR/USD immediately on a rebound only after the first test of the low of 1.1780, or even lower - from the level of 1.1758, counting on an upward rebound of 15-20 points within the day.

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

Yesterday bears tried with all their might to slow down the upward correction, but even weak fundamental reports did not provide any help. To regain control over the market, they need to keep the pair below the resistance of 1.1816 today. The formation of a false breakout there, along with weak data on the eurozone and the volume of lending, can create a signal to sell the euro in hopes of reaching the intermediate support at 1.1797, a breakout of which and a test from the bottom up will bring back the pair to the downward trend formed earlier this month. Such a scenario would open the way to the 1.1780 low. A breakthrough of this range will only be a matter of time. However, you can only open short positions there if we receive good data on the US economy. This option will push EUR/USD even lower to last week's low of 1.1758, and then to a more distant level of 1.1737, where I recommend taking profits. If the bears are not active in the 1.1816 area and we receive strong data on the eurozone today, then I recommend opening short positions only after a false breakout is formed in the 1.1831 resistance area. Selling EUR/USD immediately on a rebound is possible only after the test of the 1.1849 high, or even further- in the region of 1.1874, counting on a downward correction of 15-20 points.

Indicator signals:

Trading is carried out above 30 and 50 moving averages, which indicates an attempt by the bulls to get out of the horizontal channel.

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 1.1816 will lead to a new wave of euro growth. A breakthrough of the lower border of the indicator in the area of 1.1790 will increase the pressure on the pair.

Description of indicators