Yesterday, EUR/USD formed several market entry signals. Let's take a look at the 5-minute chart and figure out what happened. In my morning forecast, I drew attention to the 1.1001 level and recommended making market entry decisions from it. The price grew and formed a false breakout at 1.1001 which provided a sell signal for the euro. As a result, the price immediately dropped to around 1.0964, allowing for about 35 points of profit. The active protection of 1.0964 by the bulls gave a buy signal, which pushed the price 20 pips up. In the second half of the day, I didn't find suitable entry points into the market.
What is needed to open long positions on EUR/USD
Before talking about the outlook for EUR/USD, let's see what happened in the futures market and how the Commitment of Traders' positions changed. The COT report (Commitment of Traders) for April 11 recorded an increase in long positions and a decrease in short positions. The recent US statistics signal a gradual overheating of the labor market and a drop in retail sales volume, which will definitely curb inflationary pressure in the US, allowing the Federal Reserve to halt the interest rate hike cycle. However, according to the minutes of the last FOMC meeting, the policymakers do not intend to hit a pause button yet. Most likely in May this year, we will see another rate hike of 0.25%. This will allow the US dollar to maintain its upper hand over the euro, so EUR/USD is expected to settle below 1.1000. This week, there is nothing interesting in the economic calendar, except for business activity reports on the private and manufacturing sectors. Thus, the euro sellers will have every chance to continue the downward correction. The COT report indicates that non-commercial long positions increased by 18,764 to 244,180, while non-commercial short positions declined by 1,181 to 80,842. As a result, the total non-commercial net position decreased and amounted to 162,496 last week against 143,393. EUR/USD closed on Friday lower at 1.0950 against 1.1 a week ago.
Today, the euro may receive support in the first half of the day and recover quite well, making up for all yesterday's decline. For this, good data is needed on the Eurozone business sentiment index from the ZEW Institute, as well as similar upbeat data on the German business climate and the current situation index. If the indicators exceed economists' forecasts, it will be a good reason to add more long positions. In case of a negative market response to the reports, it would be nice to see the bulls manifesting in the area of intermediate support at 1.0924, which I don't particularly rely on. A false breakout there will be a reason to open long positions, reckoning the pair's recovery and the development of a new bullish trend with the updating of the nearest resistance at 1.0955, where the moving averages pass, playing on the sellers' side. A breakthrough and test from top to bottom of this range, in light of strong statistics in the eurozone, will also provide a buy signal, allowing to update 1.0983. It will cement hope for a larger upward movement to the high of 1.1008, where I will fix the profit. The ultimate goal will be the area of 1.1037, but it looks unrealistic. In the case EUR/USD declines the buyers don't claim themselves at 1.0924, which is quite likely, the euro will come under selling pressure again. In this case, only a false breakout in the area of the next support at 1.0897 will be a reason to buy the euro. I will open long positions on EUR/USD immediately on a drop from the low of 1.0867, or even lower at about 1.0834, with the target based on an upward intraday correction of 30-35 pips.
What is needed to open short positions on EUR/USD
The bears are still holding the upper hand, but it seems that the downward correction is coming to an end. To prevent this, the sellers must definitely assert themselves in the area of 1.0955, where a false breakout will be a signal to open new short positions. Poor data from the ZEW indicators will lead to a downward movement of the euro towards the nearest support at 1.0924. A breakthrough, consolidation, and a reverse test from bottom to top of this level will form an additional entry signal for short positions, bearing in mind a further downward correction by activating the buyers' stop orders, which will push the pair to 1.0897. We are expecting the price to move beyond this level only in the second half of the day. The target will be the support at 1.0867, where I will fix the profit. In case of an upward movement of EUR/USD during the European session, and the absence of the bears at 1.0955, which is quite likely, the bulls may not regain control of the market, but the pressure on the euro will weaken. In this case, I advise you to delay opening short positions until 1.0893 is reached. A false breakout there will become a new opportunity for opening short positions. I will sell EUR/USD immediately on a rebound from the high of 1.1008, or even higher - from 1.1037, bearing in mind a downward intraday correction of 30-35 pips.
Indicators' signals
Moving Averages
The instrument is trading above the 30 and 50-day moving averages. It proves that the instrument is still under selling pressure.
Note: The period and prices of the moving averages are considered by the analyst on the 1-hour chart and differ from the general definition of classic daily moving averages on the daily chart.
Bollinger Bands
In case EUR/USD declines, the lower indicator's border around 1.0897 will act as support. Alternatively, if the instrument grows, the indicator's upper border at 1.1970 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 9 Bollinger Bands (Bollinger Bands). Period 20 Non-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 short and long positions of non-commercial traders.