Yesterday, traders received just one signal to enter the market. Let us take a look at the 5-minute chart to clear up the market situation. Earlier, I asked you to pay attention to the level of 1.0618 to decide when to enter the market. A decline and false breakout of 1.0618 led to a perfect buy signal. As a result, the pair advanced by just 10 pips. After that, the rapid rise stopped. There were no other signals to enter the market.
Conditions for opening long positions on EUR/USD:
Today, buyers will hardly find a reason to go above the upper limit of the sideways channel located at 1.0659. Since there is no data from the eurozone, pressure on the currency may return. In this case, the pair may slide to the middle of the channel of 1.0618, where there are bullish MAs. Thus, it will be wise to buy the euro after a decline and a false breakout of 1.0618, which will give an entry point. This will allow bulls to reach 1.0659, which has been already tested today. A breakout and a downward test of this area will give an additional buy signal with the target at the high of 1.0703. A breakout of this level will affect bears' stop orders and form another buy signal with the target at 1.0741. If the price tests this level, it will mean the beginning of a new upward trend. Traders are better to lock in profits at this level. If the euro/dollar pair declines and buyers fail to protect 1.0618, pressure on the pair will return. In the event of this, the price may slide to 1.0576. There, traders may go long only after a false breakout. It is also possible to buy the asset just after a bounce off 1.0535 or even lower – at 1.0495, expecting a rise of 30-35 pips within the day.
Conditions for opening short positions on EUR/USD:
Sellers are likely to become active, especially near the closest resistance level of 1.0659. If bears fail to protect this level, the pair may reach new highs of the month. The absence of data from the eurozone may cap the upward potential of the pair. Thus, there is a reason for a false breakout. That is why it will be better to sell the asset after an unsuccessful consolidation above 1.0659. This will lead to a movement towards the middle of the channel located at 1.0618. A breakout and a test of this level will return the pair under pressure, thus giving an additional sell signal with the target at 1.0576. There, bears may retreat. If the price settles below this level, it may slide deeper to 1.0535. This will give hope for a bearish movement at the end of the year. The farthest target is located at 1.0495, where it is recommended to lock in profits. If the euro/dollar pair declines during the European session and bears fail to protect 1.0659, traders should avoid selling until the price hits 1.0703. It is also possible to sell the asset after an unsuccessful settlement. Traders may go short just after a rebound from the high of 1.0741, expecting a decline of 30-35 pips.
COT report
According to the COT report from December 13, the number of both long and short positions dropped. Most traders decided to lock in profits before the meetings of the global central banks, which were held last week. This, in turn, led to a decline in the volume of positions. It is obvious that the hawkish policy chosen by the Fed and the ECB will continue to affect the growth of risk assets. The fact is that the intention of the central banks to combat inflation may lead to a recession in both the US and Europe. The COT report unveiled that the number of long non-commercial positions decreased by 8,648 to 236,415, whereas the number of short non-commercial positions dropped by 8,480 to 111, 700. At the end of the week, the total non-commercial net position became slightly smaller and amounted to 122,247 against 123,113. This indicates that investors remain balanced. Although they avoid buying the euro at the moment, they are not in a hurry to sell risky assets even at the current prices. A new fundamental reason is needed for further growth in the euro. The weekly closing price rose to 1.0342 from 1.0315.
Signals of indicators:
Moving Averages
Trading is performed around 30- and 50-day moving averages, which still points to a sideways movement.
Note: The period and prices of moving averages are considered by the author on the one-hour chart which differs from the general definition of the classic daily moving averages on the daily chart.
Bollinger Bands
If the pair advances, a resistance level could be seen at 1.0650, the upper limit of the indicator. In case of a decline, the lower limit of the indicator located at 1.0618 will act as support.
Description of indicators
Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart. Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph. MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9. Bollinger Bands. The period is 20. Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements. Long non-commercial positions are the total number of long positions opened by non-commercial traders. Short non-commercial positions are the total number of short positions opened by non-commercial traders. The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.