Last Friday, only one entry signal was formed. Let's have a look at what happened on the 5-minute chart. In my previous review, I mentioned the level of 1.0709 as a possible entry point. A decline to this level and its false breakout formed a buy signal. However, due to low volatility and the lack of economic reports from the EU, the euro failed to develop a strong movement. No entry signals were formed in the second half of the day.
For long positions on EUR/USD:
The lack of any important macroeconomic reports has balanced the EUR/USD pair, and the situation is unlikely to change today. However, markets expect the European Central Bank meeting and the US inflation report this week, meaning that bears might ease their grip and bulls may initiate a correction. In the current bear market, I will act only on the dips. A false breakout around the new support at 1.0714, which acts as the midpoint of the sideways channel and where moving averages favor the bulls, will confirm an entry point into long positions, with a potential rise towards 1.0743 – a resistance level that has proven reliable. A breakout and a downward test of this range in the absence of Eurozone data will boost demand for the euro, giving it a chance to rally to 1.0772. The ultimate target is seen at the 1.0798 area, where I will be taking profit. If EUR/USD declines and there is no buying activity at 1.0714, bears will regain control. In this scenario, only a false breakout around 1.0669, which we didn't reach yesterday, will serve as a signal to buy the euro. I will open long positions immediately on the rebound from 1.0637, considering a bullish correction of 30-35 pips within the day.
For short positions on EUR/USD:
Bears continue to dominate the market, albeit with a slightly weakened grip. In the first half of the day, the main goal for sellers will be the 1.0743 level. A false breakout at this level will generate a sell signal, opening the path for the 1.0714 support level. Only after breaking through and settling below this range, followed by an upward retest, do I expect another sell signal targeting 1.0669. This is where large buyers may step in. The ultimate target is the 1.0637 level, where I will be taking profit. If EUR/USD moves upward during the European session and bears are absent at 1.0743, which is more likely in the first half of the day, bulls will get a chance to build a correction against the bearish market. If so, I will postpone selling the pair until the price hits a new resistance at 1.0772. You can also sell from this level but only after a failed consolidation. I will open short positions immediately on the rebound from the 1.0798 high, aiming for a bearish correction of 30-35 pips.
COT report
The Commitments of Traders (COT) report for August 29 indicates a drop in long positions and a rise in short ones. Such market shifts mirror the hawkish remarks made by the Federal Reserve Chairman Jerome Powell at the Jackson Hole Symposium. The recently released data on the US Personal Consumption Expenditures Index and the labor market have further convinced investors that the Fed might need to hike rates once more, thus preserving the dollar's allure. Interestingly, the euro's decline offers a compelling point of entry. In the present circumstances, an optimal medium-term strategy remains to buy risk assets on dips. The COT report reveals that the non-commercial long positions decreased by 8,849 to stand at 230,542, while the non-commercial short positions jumped by 3,232 to 83,863. Consequently, the spread between long and short positions expanded by 4,753. The closing price dropped to 1.0882 from 1.0866, indicating a bearish market.
Indicator signals:
Moving Averages
Trading above the 30- and 50-day moving averages indicates buyers' attempts to regain control of the pair.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If the pair declines, the lower band of the indicator at 1.0689 will act as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;
• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.