In my morning forecast, I emphasized the level of 1.1206 and recommended considering it for trading decisions. Let's examine the 5-minute chart and analyze what occurred. A false breakout at this level provided a buy signal, resulting in an upward movement of over 30 points. The technical outlook remained unchanged during the second half of the day.
To initiate long positions on EUR/USD, the following conditions are necessary:
Inflation in the Eurozone did not surprise and closely matched economists' predictions. The exception was the increase in core prices, which raised concerns for the European Central Bank. This suggests that while overall price pressures are decreasing, abandoning an aggressive monetary policy by the regulator is premature. Consequently, buying the euro may continue, but the market increasingly calls for a correction. Therefore, it is advisable to open long positions only on declines. Considering that 1.1206 has been tested more than four times, another test of this level could be fatal. Therefore, I am not particularly relying on it. However, if the bulls reemerge at 1.1206 after a decline, especially following weak US statistics, it is possible to buy with the expectation of another surge in the pair towards the middle of the sideways channel at 1.1243. Just below this level, there are moving averages favoring sellers. A breakout and subsequent retest from above within this range will strengthen demand for the euro, offering an opportunity for a surge towards 1.1275, the yearly high. The ultimate target remains around 1.1310, indicating further development of an upward trend for the euro. I will make profits there.
In the event of a decline in EUR/USD and the absence of buyers at 1.1206 during the US session, bears may become more active, anticipating a correction. Therefore, only a false breakout around the next support level at 1.1164 will signal to buy the euro. I will open long positions from a minimum of 1.1130, aiming for a 30-35 point upward correction within the day.
To initiate short positions on EUR/USD, the following conditions are necessary:
Sellers continue to fulfill their tasks and try to find a reason for a correction. In the second half of the day, positive data on US construction, specifically the volume of building permits issued and the number of new foundations laid, can exert pressure on the pair. However, protecting 1.1243 will remain the top priority. With weak data, the euro will regain attractiveness, and the dollar will weaken, leading to an upward surge in the pair. A false breakout at 1.1243 will indicate a selling opportunity, with a decline target towards the support at 1.1206, where larger buyers are expected to emerge. A breakout and subsequent retest from below within this range, combined with strong US statistics, will pave the way toward 1.1164. This would signify a significant correction for the euro, potentially reigniting buyer interest. The ultimate target will be around 1.1130, where I will take profits.
If EUR/USD moves upward during the US session and there are no bears at 1.1243, only a few points away from testing this level in the first half of the day, the euro will continue its upward movement. In such a scenario, I will postpone initiating short positions until the next resistance at 1.1275. Selling can also be considered there, but only after an unsuccessful breakout. I will initiate short positions from a maximum of 1.1310, aiming for a 30-35 point downward correction.
In the Commitment of Traders (COT) report for July 11, there was an increase in both long and short positions, resulting in minimal changes in the market balance in favor of euro buyers. The released US inflation data, indicating a significant slowdown, particularly in core prices, had a notable impact on euro buyers, leading to a surge and reaching new yearly highs, surpassing the psychological level of 1.1000 that remained unbroken for nearly six months. The fact that the Federal Reserve no longer needs to raise interest rates has weakened the US dollar considerably. While the market remains bullish, buying the euro on declines remains the optimal medium-term strategy under the current conditions. The COT report indicated that non-commercial long positions increased by 3,079 to 223,351, while non-commercial short positions jumped by 5,754 to 84,189. The overall non-commercial net position slightly decreased to 140,162 from 142,837. The weekly closing price rose to 1.1037 from 1.0953.
Indicator signals:
Moving Averages
Trading occurs around the 30-day and 50-day moving averages, indicating market uncertainty.
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 the case of an upward movement, the upper boundary of the indicator around 1.1243 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) - 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 overall non-commercial net position is the difference between non-commercial traders' short and long positions.