Last Friday, 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 1.0586 as a possible entry point. A rise and a false breakout at this mark formed a sell signal, but the pair did not actively fall. In the afternoon, defending the support level at 1.0568 and a false breakout at this mark produced a buy signal, sending the pair up by more than 30 pips, but the pair did not leave the channel.
For long positions on EUR/USD:
Today, the euro looks to continue sideways action. In the first half of the day, only the monthly report of the Bundesbank and the eurozone consumer confidence indicator for October are scheduled for released, which is hardly interesting. Hence, an optimal buying opportunity might arise on dips, particularly after a false breakout near the support level at 1.0568, which proved itself perfectly last Friday. This is where the moving averages support the buyers. This will create a good entry point for long positions, aiming for an upward correction and potentially testing the nearest resistance at 1.0603 which was formed on Friday. A breakout and a downward retest of this range can pave the way for a surge up to 1.0638. The ultimate target is found at 1.0671 where I plan to take profits. If EUR/USD declines and shows a lack of activity at 1.0568 in the first half of the day, the euro might face additional pressure, handing control back to the sellers. In such a scenario, only a false breakout near 1.0531 would provide an entry signal. I would immediately go long on a bounce from 1.0497, aiming for an intraday upward correction of 30-35 pips.
For short positions on EUR/USD:
Sellers failed to take over the market on Friday, although they stopped the pair from entering a corrective phase. For this reason, it is critical for bears to defend the nearest resistance at 1.0603. A false breakout there will provide an entry point, targeting the support level at 1.0568, which is a kind of the middle of the sideways channel. Only after breaching this range and settling below it, and after completing an upward retest, do I anticipate another sell signal with a target at 1.0531 - last Thursday's low. The furthest target is 1.0474, where I plan to take profit. If EUR/USD moves upward during the European session and lacks bearish activity at 1.0603, bulls will try to continue the upward correction. In such a scenario, I would delay short positions until the price hits the resistance at 1.0638. I would also consider selling there but only after an unsuccessful consolidation. I will open short positions directly on a rebound from the high of 1.0671, considering a downward correction of 30-35 pips.
COT report:
The Commitments of Traders (COT) report for October 10 showed a reduction in both long and short positions. Given recent US data releases and the high inflation reported in September this year, many traders and economists are questioning whether the Federal Reserve will maintain its pause or increase borrowing costs during its November meeting. The ongoing conflict between Israel and HAMAS, along with various negative impacts on the global economy, has led to a sharp decline in demand for risk assets, which further pressures the European currency. The European Central Bank's firm stance poses yet another challenge to the euro as the Eurozone's economy continues to contract. The only positive factor is the weakening euro which now looks quite appealing to investors. The COT report reveals that non-commercial long positions decreased by 4,261 to 207,522, while non-commercial short positions declined by 850 to stand at 131,990. This resulted in the spread between long and short positions shrinking by 5,519. The closing price was up at 1.0630 compared to 1.0509, indicating a slight upward correction in the euro.
Indicator signals:
Moving averages:
Trading around the 30- and 50-day moving averages indicates a sideways movement.
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 1.0579 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.