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 1.0855 as a possible entry point. A rise and a false breakout at 1.0855 produced a good entry point in hopes that the pair would start a downward movement, but after a 10-pip corrective move, the euro was in demand again. In the afternoon, a breakout and retest of 1.0862 generated a good buy signal. As a result, the pair rose by more than 30 pips. Safeguarding the monthly highs at 1.0885 produced a sell signal, sending the price down by more than 40 pips.
For long positions on EUR/USD:
On Thursday afternoon, Federal Reserve speakers commenting on the topic of maintaining rates at current restrictive levels had supported the US dollar. Today, the European Central Bank's report on balance of payments and the eurozone Consumer Price Index might offer fresh impetus to EUR/USD traders. The decline in core inflation will surely put pressure on the euro, which might push the pair to the lower band of the sideways channel, which was formed at the end of this week. A false breakout at 1.0833, similar to what I described above, will serve as a confirmation of an entry point for long positions in hopes of supporting an uptrend and a test of the middle of the channel at 1.0865, which was formed yesterday. This is also in line with the bearish moving averages. A breakout and a downward test of this range, along with hawkish comments from ECB President Christine Lagarde and ECB board member Joachim Nagel, will produce another buy signal, offering the EUR/USD a chance to return to a monthly high of 1.0893. The ultimate target will be 1.0922, where I will lock in profits. In the event of EUR/USD dropping and a lack of activity at 1.0833, things will not go well for the bulls. In such a scenario, only the formation of a false breakout near the next support at 1.0802 will produce a buy signal. I will open long positions immediately on a rebound from 1.0774, considering an upward correction of 30-35 pips within the day.
For short positions on EUR/USD:
Sellers emerged every time the pair was trading higher so we can expect an active struggle for the middle of the sideways channel at 1.0865. Dovish statements from Lagarde and weak eurozone data can exert pressure on the euro. But until that happens, the objective is to defend 1.0865. A false breakout at this mark will give a good sell signal to support the downward correction and test support at 1.0833. This is where large buyers may step in. 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 1.0802. The ultimate target will be the 1.0774 low 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 1.0865, the pair will continue to trade within the sideways channel while the bulls have a slight advantage. Under such circumstances, I will postpone selling the pair until the price hits the monthly high at 1.0893. Selling there is also an option, but only after a failed consolidation. I will initiate short positions immediately on a pullback from 1.0922, considering a downward correction of 30-35 pips.
COT report:
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 be familiarized 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.
Indicator signals:
Moving averages:
Trading just around the 30- and 50-day moving averages indicates 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 1.0833 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.