Yesterday, several market entry signals were formed. Let's have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.0692 as a possible entry point. A rise and a false breakout near 1.0692 produced a great sell signal, but the pair failed to move sharply lower. In the afternoon, another unsuccessful attempt to climb above 1.0692 generated a sell signal, which sent the pair down by 25 pips.
COT report:
Before discussing the prospects of the EUR/USD pair, let's examine what has been going on in the futures market and how the positions in the Commitments of Traders have changed. The COT report for November 7 showed a reduction in short positions and an increase in long ones. Take note that this report only includes the market's reaction to the Federal Reserve meeting, which kept interest rates steady. However, last week, the Fed officials made it clear that their interest rate decisions will depend on the incoming data, leaving the door open for another rate increase projected by the end of the year. This week, we will familiarize ourselves with the US inflation report, which may set the pair's direction for a few weeks ahead, as well as other important data. According to the latest COT report, non-commercial positions increased by 1,649 to 212,483, while short non-commercial positions fell by 2,018 to 123,427. As a result, the spread between long and short positions increased by 1,064. The closing price rose sharply to 1.0713 from 1.0603.
For long positions on EUR/USD:
Another batch of very important economic reports could hurt the euro. We are expecting weak figures on the eurozone Q3 GDP, which may be revised downwards, on the business sentiment index from the ZEW institute of Germany and the eurozone, as well as on the eurozone employment rate. The speech of European Central Bank Executive Board member Frank Elderson will be of secondary importance. In case the reports exert pressure on the euro, given that the pair is trading near the middle of the sideways channel, a false breakout near 1.0692 (take note that below this level we have the moving averages that favor the bulls) will serve as a confirmation of a correct entry point for long positions aiming for growth towards the resistance at 1.0722, which was formed at the end of last week. A breakout and a downward test of this range will bolster demand for the euro, offering it a chance to spike to 1.0753. The ultimate target will be 1.0774, where I will lock in profits. In the event of EUR/USD dropping and a lack of activity at 1.0692, the bears will try to return to the market. In such a scenario, only the formation of a false breakout near 1.0667 will give a buy signal. I will open long positions immediately on a rebound from 1.0642, considering an upward correction of 30-35 pips within the day.
For short positions on EUR/USD:
Yesterday, sellers were active during the US session, but they failed to maintain control of the market. They will only be able to build a bearish correction after weak eurozone data. In case the pair moves upwards, it is necessary to defend the resistance at 1.0722. A false breakout at this mark, along with weak data and soft statements from ECB officials, will give a good sell signal to push the downward correction to the support at 1.0692, which is the middle of the sideways channel. Only after a breakout and consolidation below this range, as well as its upward retest, do I expect to receive another signal to sell the pair with a target at 1.0667. The ultimate target will be the 1.0642 where I will be taking profits. In the event of an upward movement in EUR/USD during the European session and the absence of bears at 1.0722, and only good eurozone data can help with this, the bulls will try to continue the uptrend. Under such circumstances, I will postpone selling the pair until the price hits the new resistance at 1.0753. Selling there is also an option, but only after a failed consolidation. I will initiate short positions immediately on a pullback from the 1.0774 high, considering a downward correction of 30-35 pips.
Indicator signals:
Moving averages:
Trading above the 30- and 50-day moving averages indicates the formation of an upward correction.
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 1.0675 will serve as support. In case it grows, the upper band at 1.0715 will act as resistance.
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.