Yesterday, the pair formed several entry signals. Let's have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.0576 as a possible entry point. A rise and a false breakout at this mark produced a great sell signal, resulting in a drop of more than 40 pips. In the afternoon, a breakout and retest of 1.0545 and a breakout and retest of 1.0520 produced signals that brought another 30 pips of profit each.
For long positions on EUR/USD:
A rise in US Durable Goods Orders showed a robust economy in the US, unlike the eurozone economy, and so such fundamentals continue to weigh on the euro and simultaneously boost the USD. Today, German consumer price index figures will be released in the morning, and the eurozone consumer confidence indicator is also out. Personally, I don't think that a drop in German inflation can provide much help to the euro. Another thing is if inflation is higher than expected - then the euro will definitely fall further. The economic bulletin from the European Central Bank will not affect today's balance of power. For this reason, I plan to act on a dip in EUR/USD after it forms a false breakout around the nearest support at 1.0479 together with divergence on the MACD indicator. This will confirm the entry point for long positions, targeting a correction and an update of the resistance at 1.0516. A breakout and a downward test of this range, accompanied by strong eurozone data, will bolster demand for the euro, providing an opportunity for a surge towards 1.0545. This is in line with the bearish moving averages. My ultimate target is the 1.0576 zone where I intend to take profits. If EUR/USD declines and there is no activity at 1.0479, which is more likely, bears will gain more control. Only a false breakout near 1.0439 will signal a buying opportunity. I will initiate long positions immediately on a rebound from 1.0395, aiming for an upward correction of 30-35 pips within the day.
For short positions on EUR/USD:
Sellers continue to dominate the market. Obviously, they need weak eurozone reports and to defend the nearest resistance at 1.0516 to further build on the bearish market. A false breakout on that mark will provide an entry point, targeting the new monthly low of 1.0479. Only after a breakout and stabilization below this range, on the back of German inflation, as well as its upward retest will I look for another sell signal, aiming for 1.0439, where larger buyers might step in. My ultimate target will be the 1.0395 level where I will take profits. If EUR/USD moves up during the European session and bears are absent at 1.0516, bulls will get a good chance to build an upward correction. In this scenario, I will delay going short until the price hits the new resistance at 1.0545, where the euro has already fallen yesterday. I may consider selling there but only after a failed consolidation. I will immediately initiate short positions on a rebound from the 1.0576 high, aiming for a downward correction of 30-35 pips.
COT report:
The COT report for September 19 showed a sharp decline in long positions and a rise in the short ones. Adverse shifts in the Eurozone's economic landscape and looming threats of further interest rate hikes by the European Central Bank (ECB) have bolstered the prevailing bearish sentiment. Interestingly, the euro did not find much respite even after the Federal Reserve decided to hold rates steady. However, it is worth noting that the Fed clearly communicated the possibility of another rate increase before the year ends. The COT report indicates that non-commercial long positions dipped by 4,952 to stand at 207,424. Conversely, non-commercial short positions saw an increase of 6,147, reaching a total of 105,443. As a result, the spread between long and short positions narrowed by 8,290 contracts. The closing price dropped to 1.0719 from 1.0736, further underscoring the bearish market sentiment for EUR/USD.
Indicator signals:
Moving averages:
Trading below the 30- and 50-day moving averages indicates a further downtrend in 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 EUR/USD declines, the indicator's lower border near 1.0479 will serve 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.