EUR/USD: plan for the European session on October 21. COT report. Euro tried but failed

Several market entry signals were formed yesterday. Let's take a look at the 5-minute chart and see what happened. I paid attention to the 0.9758 level in my morning forecast and advised making decisions on entering the market there. A sharp decline in market volatility after the release of data on German producer prices, which once again jumped, caused the pair to remain in the horizontal channel. The pair could also not reach the nearest levels indicated in the morning forecast, so it was not possible to get entry points to the market in the first half of the day. In the afternoon, traders reacted positively to the news from the UK, which led to an update and several false breakouts in the resistance area of 0.9835. Each of the two signals made it possible for us to leave the market with a profit of more than 50 points.

Considering that the bears have returned balance to the market, I expect that they will show themselves this morning, which is why I expect the euro to fall in the short term. The absence of important fundamental statistics will be the reason for this. If the pair goes down, forming a false breakout in the area of yesterday's support at 0.9758, which we did not reach, will be an excellent reason to build up long positions with the prospect of a second recovery to 0.9801, as we failed to settle above it yesterday by the end of the day. We can talk about the bulls' attempts to regain control over the market after this range is surpassed and has been tested from top to bottom, which may take place closer to the US session, when the report on the indicator of consumer confidence in the eurozone is released. However, in order to force traders to buy the euro at the end of the week, the data should be much better than economists' forecasts. A breakthrough of 0.9801 would hit speculative bears' stops and create another buy signal with the possibility of a push higher to the 0.9832 area. This will reinforce the bullish trend seen since October 13th. An exit above 0.9832 will serve as a reason for growth to the area of 0.9871, where I recommend taking profits.

If the EUR/USD declines and traders are not active at 0.9758, bulls will completely lose control over the market, which will only increase pressure on the euro. This will lead to the continuation of the formation of the downward price channel and to the fall to the area of 0.9719. The best time to open long positions would be a false breakout at this level. I advise you to buy EUR/USD immediately on a rebound only from 0.9679, or even lower - in the area of 0.9635, counting on an upward correction of 30-35 points within the day.

The bears coped with all the tasks yesterday and now they need to break through the area below 0.9758, which will definitely ruin the entire buying strategy observed after the dynamic growth on October 17th. However, we should not forget about the need to protect 0.9801. This resistance can already be tested in the morning. The best time to open short positions would be when a false breakout forms at the level of 0.9801, which will provide an excellent entry point, allowing it to return to the border of 0.9758. Slightly below 0.9801 are moving averages, playing on the bears' side, which definitely plays into their hands. Consolidation below 0.9758, as well as a reverse test from the bottom up - a reason to further sell EUR/USD in order to remove bullish stop orders and a larger fall to the 0.9719 area. The farthest target will be the area of 0.9679, where I recommend taking profits.

In case EUR/USD moves up during the European session, as well as the absence of bears at 0.9801, the demand for the pair will increase by analogy with yesterday, which will lead to a more powerful upward correction. In this case, I advise you not to rush into selling: I recommend opening short positions only if a false breakout is formed at 0.9832. You can sell EUR/USD immediately for a rebound from the weekly high of 0.9871, or even higher - from 0.9917, counting on a downward correction of 30-35 points.

The October 11 Commitment of Traders (COT) report logged a sharp decline in long positions and an increase in short ones: clearly, traders were preparing for inflation and retail sales data in the US. It is clear that the Federal Reserve is having a hard time dealing with rising consumer prices, as the September report clearly shows, where inflation slowed down only 0.1% compared to the previous reading. Notably, we haven't seen the euro sell-off below the parity level for a long time already. What is more, even the geopolitical situation and the key interest rate hike by the Fed will hardly push the price lower. That is why it is a good reason to start buying the euro in the middle term. The COT report unveiled that long non-commercial positions rose by 3,255 to 196,136, while short non-commercial positions rose by 2,928 to 158,637. At the end of the week, the total non-commercial net position remained positive and amounted to 37,499 against 43,682. This indicates that investors are taking advantage of the moment and continue to buy the cheap euros below parity, as well as accumulate long positions, counting on the end of the crisis and the pair's recovery in the long term. The weekly closing price decreased and amounted to 0.9757 against 1.0053.

Moving averages

Trading is below the 30 and 50-day moving averages, indicating an attempt by the bears to take over the market.

Note: The period and prices of moving averages are considered by the author on the H1 chart, which differs from the general definition of the classic daily moving averages on the daily chart.

Bollinger Bands

In case of growth, the upper border of the indicator in the area of 0.9832 will act as resistance. In case of a decline, the lower border of the indicator around 0.9740 will act as support.