Yesterday, there were several entry points. Now, let's look at the 5-minute chart and figure out what actually happened. In my morning article, I turned your attention to 1.1034 and recommended making decisions with this level in focus. A rise and a false breakout provided an entry point into short positions. However, a large downward movement did not take place. After some time, the euro/dollar grew again. Sellers had to close their Stop Loss orders. In the afternoon, an unsuccessful consolidation above 1.1056 led to another entry point into short positions. After that, the pair declined by 15 pips. However, bears failed to initiate a large downward movement.
When to open long positions on EUR/USD:
As widely expected, the Fed raised the key rate. Fed Chair Jerome Powell did not make hints at the likelihood of a softer stance. He also did not provide comments on the future plans for monetary policy. He also stated that the main priority is to tame inflation. Risk appetite recovered following his speech.
Today, traders are anticipating the ECB meeting. If the central bank hikes the key rate by 50 basis points, it will give a buy signal within the uptrend. The pair may advance above the April highs. Before that, there might be pressure on EUR/USD in the morning, which could allow investors to enter the market at more attractive prices.
One should pay attention to 1.1058 formed yesterday. The moving averages that are benefiting bulls are passing below it. A false breakout of this level will lead to new entry points into long positions. The pair is likely to climb to the resistance level of 1.1094. A breakout and a downward retest of this level amid the rate increase will boost bullish sentiment. As a result, the uptrend will start. It will give an additional entry point into long positions. The euro could jump to a high of 1.1129. A more distant target will be the 1.1174 level where I recommend locking in profits.
If EUR/USD declines and bulls show no activity at 1.1058, which is very unlikely given high risk appetite, only a false breakout of the next support level of 1.1025 will generate a buy signal. You could buy EUR/USD at a bounce from 1.0996, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Bears clearly did not count on such a scenario. Given that the ECB is likely to raise the rate, I would advise you not to rush into short positions. Sellers need to protect the resistance level of 1.1094. A false breakout of this level and weak Services PMI data from the eurozone could trigger a sell signal. The pair may decline to 1.1058, a new support level formed yesterday. A fall below this level as well as an upward retest will lead to a decrease to 1.1025. A more distant target will be the 1.0996 level where I recommend locking in profits.
If EUR/USD rises during the European session and bears show no energy at 1.094, bulls are likely to continue yesterday's trend in the morning. In this case, it is better to postpone short positions until a false breakout of 1.1129. You could sell EUR/USD at a bounce from 1.1174, keeping in mind a downward intraday correction of 30-35 pips.
COT report
The COT report (Commitments of Traders) for April 25 logged an increase in long positions and a decrease in short positions. Despite some market moves ahead of the Federal Reserve meeting, where rates will definitely be raised by 0.25%, traders are not in a hurry to close long positions on EUR/USD as they expect more aggressive policy from the European Central Bank. The risk of a recession in the US and a rapid slowdown in the economy, along with problems in the banking sector, also allow traders to bet on growth in risky assets in the medium term, which is beneficial to EUR buyers. The COT report shows that non-commercial long positions rose by 1,147 to 243,516, while non-commercial short positions declined by 3,892 to 74,116. As a result, the total non-commercial net position went up last week to 144,892 against 139,956 a week earlier. EUR/USD closed last week lower at 1.1006 from the closing price of 1.1010 in the previous week.
Indicators' signals:
Trading is carried out above the 30 and 50 daily moving averages, which indicates bulls' attempt to take the upper hand.
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 declines, the indicator's lower border at 1.1025 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.