In the morning article, I turned your attention to 0.9975 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and figure out what actually happened. I did not open short positions as a decline to 0.9975 and its subsequent breakout occurred without an upward test. In the afternoon, the technical outlook changed slightly but the trading strategy remained the same.
When to open long positions on EUR/USD:
Traders are now pricing in that the inflation data will be worse than economists' forecasts. It is extremely important for markets to learn the figures of the Consumer Price Index for October and the Core Consumer Price Index. The latter measures the changes in the price of goods and services, excluding food and energy. If inflation rises again, the pressure on the euro will escalate, triggering a new wave of a sell-off. If the reading declines more than expected, the pair will surely resume its bull run, climbing higher. However, given the current circumstances, it is better to open long positions only after a false breakout of the support level of 0.9928 takes place. If so, there could be a buy signal. It will facilitate the uptrend. However, a bullish scenario depends on US inflation data. If bulls regain ground, the pair may return to the resistance level of 0.9979 formed in the morning. A breakout and a downward test of this level will open the way to 1.0035. In this case, the pair has a chance to consolidate above the parity level. After that, it may jump to 1.0083 where I recommend locking in profits. A more distant target will be the 1.0136 level. If EUR/USD drops during the American session, and bulls show no energy at 0.9928, it will significantly limit the upside potential as the pressure on the pair will only increase. Only a false breakout of the support level of 0.9881 will provide a new buy signal. You can buy EUR/USD immediately at a bounce from the support level of 0.9837 or 0.9793, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Sellers have succeeded today in reviving the bear market, taking advantage of the pessimism ahead of inflation data. It would be appropriate to open short positions after a false breakout of the resistance level of 0.9979. This scenario may come true if the Consumer Price Index is in line with economists' forecasts. It will also confirm that the Fed has chosen the right strategy in the fight against inflation. In this case, the pair is likely to test 0.9928. If it decreases below this level and performs an upward test, it will generate an additional sell signal. Bulls will have to close their Stop Loss orders. The euro could dive down to 0.9881 where I recommend locking in profits. some investors suppose that the pair is likely to slip lower only amid political news, namely the news on the election to the US Congress. Currently, Democrats are leading. If EUR/USD rises during the American session and bears show no energy at 0.9979, traders will rush to close short positions. The pair may rebound to 1.0035 where the moving averages are passing in negative territory. If bears do not regain control at this level, it is better to postpone short positions until a false breakout of 1.0083 takes place. You can sell EUR/USD immediately at a bounce from 1.0136, keeping in mind a downward intraday correction of 30-35 pips.
COT report
The COT report (Commitment of Traders) for November 1 logged a drop in short positions and an increase in long ones. The US dollar is losing ground against risky assets even though the Fed sticks to a hawkish stance. Many traders expect the central bank to slow down aggressive tightening in the spring of next year. After that, the regulator could move to monetary easing. If so, the euro is highly likely to soar to new highs. This week, the euro could jump amid US inflation data, which the Fed primarily takes into account when making monetary policy decisions. If inflation drops, the US dollar will weaken even more and the euro will be able to consolidate above the parity level. However, the upside potential of the euro is also limited. The ECB has recently announced it could revise its stance in the near future if the eurozone economy continues to shrink at a rapid pace. The COT report revealed that the number of long non-commercial positions increased by 13,036 to 239,770, while the number of short non-commercial positions declined by 17,845 to 133,980. At the end of the week, the total non-commercial net position remained positive and amounted to 105,790 against 74,909. It indicates that investors continue to buy up the cheap euro below the parity level. They are also accumulating long positions betting on long-term recovery. The weekly closing price rose to 0.9918 against 1.0000.
Indicators' signals:
Trading is carried out below the 30 and 50 daily moving averages. It indicates that the euro is depreciating now.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If EUR/USD rises, the indicator's upper border at 1.0055 will serve as resistance.
Description of indicators
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked green on the chart.MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9Bollinger Bands (Bollinger Bands). Period 20Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that 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 position of non-commercial traders.Total non-commercial net position is the difference between the short and long positions of non-commercial traders.