In my morning forecast, I emphasized the level of 1.0705 and recommended making trading decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The decline and the formation of a false breakout at this level resulted in a buy signal, leading to an upward movement of over 30 pips. The technical picture stayed the same in the second half of the day.
To open long positions on EUR/USD, the following is required:
The GDP data for the eurozone in the first quarter was revised downward by 0.1%, which put slight pressure on the pair in the first half of the day, and buyers took advantage of it to increase their long positions. During the US session, we await the figures for the weekly number of initial jobless claims in the US. A decrease in the indicator may lead to a decline in EUR/USD, providing an excellent opportunity to increase long positions to reach a new weekly high. The formation of a false breakout around 1.0705, similar to what I discussed earlier, will confirm the presence of buyers pushing the euro up, giving a chance to enter long positions to reach the resistance level at 1.0739, which is also the upper boundary of the sideways channel. A breakthrough and a top-down test of this range will strengthen demand for the euro, providing an additional entry point for increasing long positions and aiming for a new high of around 1.0770. The ultimate target remains the 1.0800 area, where I will take profits.
In the case of a decline in EUR/USD and the absence of buyers at 1.0705 (where the moving averages are playing in favor of bulls), pressure on the euro will return. Therefore, only the formation of a false breakout around the lower boundary of the sideways channel at 1.0669, from which the pair has already rebounded once today, will signal a buying opportunity for the euro. I will open long positions on a bounce from 1.0637, with a target of a 30-35 pip upward correction within the day.
To open short positions on EUR/USD, the following is required:
The bears failed to break through the middle of the channel. Fundamental statistics from the US, expected today, may provide temporary support for the dollar, but it is best to take your time with selling in the second half of the day. After an unsuccessful consolidation above yesterday's resistance at 1.0739, I will act only on the rise. A false breakout at this level will signal a selling opportunity capable of pushing the pair back toward the middle of the channel at 1.0705, where the moving averages are playing in favor of the bulls. Consolidation below this range and a subsequent bottom-up test will pave the way to 1.0669. The ultimate target will be the 1.0637 area, where I will take profits.
In the event of an upward movement of EUR/USD during the US session and the absence of bears at 1.0739 (which would be the second test of this area this week), we can expect a return of demand for the euro. In that case, I will postpone short positions until the level of 1.0770. Selling can be done there, but only after an unsuccessful consolidation. I will open short positions on a bounce from the 1.0800 high, with a 30-35 point downward correction target.
In the COT report (Commitment of Traders) for May 30th, there was a decrease in both long and short positions. Long positions decreased significantly, confirming a decrease in demand for risky assets. Concerns about the slowdown of the European economy and the onset of a recession, along with the continuation of an aggressive policy by the European Central Bank despite the initial signs of a slowdown in underlying inflationary pressures - all of this currently discourage investors from buying the euro, forcing them to adopt a wait-and-see position. Meanwhile, the US labor market continues to demonstrate strength, so after the June pause, the Federal Reserve will likely continue raising interest rates, thus maintaining demand for the dollar. According to the COT report, non-commercial long positions decreased by 8,253 to 241,817, while non-commercial short positions decreased by 242 to 76,092. As a result, the overall non-commercial net position decreased to 163,054 from 185,045. The weekly closing price decreased to 1.0732 from 1.0793.
Indicator signals:
Moving Averages
Trading is conducted above the 30 and 50-day moving averages, indicating a potential rise in the euro.
Note: The author considers the period and prices of the moving averages on the H1 hourly chart, which differ from the general definition of classical daily moving averages on the D1 daily chart.
Bollinger Bands
In case of an upward movement, the upper boundary of the indicator around 1.0725 will act as resistance.
Description of Indicators
• Moving Average (determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.
• Moving Average (determines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.
• MACD Indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9.
• Bollinger Bands. Period 20.
• Non-commercial traders - speculators, such as individual traders, hedge funds, and large institutions, using the futures market for speculative purposes and meeting specific requirements.
• Long non-commercial positions represent the total long open positions of non-commercial traders.
• Short non-commercial positions represent the total short open positions of non-commercial traders.
• The net non-commercial position is the difference between non-commercial traders' short and long positions.