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 1.0930 as a possible entry point. A breakout and a downward retest of 1.0930 produced an excellent buy signal. As a result, the pair rose by more than 25 pips. In the afternoon, safeguarding the resistance at 1.0967 generated a sell signal, but after the pair fell by 12 pips, the demand for the euro returned.
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 December 12 indicates a decrease in long positions and an increase in short ones. Obviously, the Federal Reserve's December meeting and its sudden pivot together with the European Central Bank's tough stance had a minor effect on the positioning of major players, as buyers of risky assets clearly have the advantage. A number of reports related to inflation in the eurozone and the US will be released soon, which will throw light on the Fed's stance on 2024. But whatever the data, we will expect further growth from the euro in the medium term. The COT report indicated that long non-commercial positions fell by 3,847 to 231,837, while short non-commercial positions increased by 1,186 to 84,510. As a result, the spread between long and short positions decreased by 3,599.
For long positions on EUR/USD
Reports on Germany's GfK Consumer Climate indicator and the European Central Bank's current account may exert pressure on the euro. But the eurozone consumer confidence indicator for December may also garner investor interest. A decline in the indicator may lead to a small correction and a test of the new support at 1.0955, established yesterday. Slightly below this level, we have the moving averages, so buyers will have a good chance to continue the uptrend. In this case, it is necessary to form a false breakout near 1.0955, which will generate a buy signal, in hopes that the pair will reach 1.0984 - the resistance that was repeatedly tested. A breakout and a downward test of this range will produce another buy signal and a chance to test the high near 1.1009. The furthest target would be the 1.1041 area, where I plan to take profits. If EUR/USD declines and there is no activity at 1.0955, the pair will move sideways, but nothing serious will happen before the speech of ECB Executive Board member Philip Lane. In this case, it will be possible to enter the market after forming a false breakout near the next support at 1.0924. I will open long positions immediately on a rebound from 1.0891, bearing in mind an upward correction of 30-35 pips within the day.
For short positions on EUR/USD:
Sellers failed to maintain control over the market yesterday. In case the market positively reacts to today's eurozone data, I expect the bears to emerge after forming a false breakout near 1.0984. This will generate a sell signal with the goal of starting a corrective move and a test of support at 1.0955. Only after a breakout and consolidation below this range, as well as an upward retest, do I expect another sell signal at 1.0924, where I expect major buyers to emerge. The lowest target will be 1.0891, where I will take profits. Testing this level will prevent the pair from moving into a wide sideways channel. In case of an upward movement of EUR/USD during the European session amid strong data, as well as the absence of the bears at 1.0984, which is more likely, the buyers will aim to update the monthly highs. In this case, I will postpone selling the pair until the price tests 1.1009. There, selling is also possible but only after a false breakout. I will open short positions immediately on a rebound from 1.1041 aiming for a downward correction of 30-35 pips.
Indicator signals:
Moving averages:
Trading above the 30- and 50-day moving averages indicates a possible uptrend.
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 1.0930 will serve as support. In case of growth, the indicator's upper border near 1.1000 will serve 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.