Yesterday, the pair formed some great entry signals. Let's see what happened on the 5-minute chart. In my morning review I mentioned the level of 1.0935 as a possible entry point. A rise and a false breakout near 1.0935 produced a sell signal in continuation of the downtrend. However, the eurozone released good PMI data, which limited the pair's potential to fall. A breakout and retest of 1.0935 generated a buy signal, which sent the pair up by more than 30 pips. In the second half of the day, the bears' active defense of the 1.0970 level and a false breakout at this mark produced a sell signal, and the pair returned to the 1.0934 area, making it possible to take about 35 pips.
For long positions on EUR/USD
Strong US data from the ADP and on the labor market brought back the demand for the dollar on Thursday, and the euro was unable to continue its uptrend, which was based on good eurozone PMI data released earlier in the day. Today, market participants will focus on the eurozone inflation data. Its growth in December 2023 may not be the most pleasant news for the European Central Bank, but on the other hand, such a development could support demand for the euro during the European session. In case the data exerts pressure on the pair, especially if core inflation falls sharply, I will act after a false breakout near the nearest support at 1.0911, which is the middle of the new sideways channel. This is also in line with the bullish moving averages. An unsuccessful consolidation at 1.0911 will provide an entry point that could bring EUR/USD back to 1.0970. A breakout and a downward test of this range will produce a buy signal, offering a chance to support the bullish correction and the prospect of testing 1.1006. The furthest target would be a high at 1.1041, where I plan to take profits. If EUR/USD declines and there is no activity at 1.0931 in the first half of the day, the pair will remain under pressure until the release of the US labor market data. In this case, it will be possible to enter the market after forming a false breakout near 1.0897. I will open long positions immediately on a rebound from 1.0867, bearing in mind an upward correction of 30-35 pips within the day.
For short positions on EUR/USD:
Sellers are gradually regaining control over the market, only allowing a minor correction to take place on Thursday. Weak eurozone data should help strengthen the bears' positions. Of course, it would be nice to see the pair rise and form a false breakout at 1.0970, which was established yesterday. An unsuccessful consolidation on this mark, similar to what I discussed above, will indicate the bears' presence in the market, which may push the price to 1.0931, where the bulls were also active yesterday. Only after a breakout and consolidation below this range, as well as an upward retest, do I expect another sell signal at 1.0897. Protecting this level will be the bulls' last hope. The lowest target will be 1.0867, where I will take profits. In case of an upward movement of EUR/USD if the eurozone data shows a sharp rise, and bears are not active at 1.0970, the demand for EUR/USD will return. In that case, I will postpone selling the pair until the price tests the next resistance at 1.1006. 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.
COT report:
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.
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 1.0931 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.