FX.co ★ EUR/USD: plan for the European session on May 17. COT reports. Bulls aim for resistance at 1.2149 and update monthly high

To open long positions on EUR/USD, you need:

Traders were disappointed with last Friday's US retail sales report as they were betting that the US dollar would strengthen even more. Several pretty good signals to enter the market were formed at the end of the day. Let's take a look at the 5 minute chart and break down all the entry points. I advised you to open long positions after a breakthrough and consolidation above resistance at 1.2103, which happened. In the first half of the day, the bulls managed to rise above this range, however, a clear test of this level from top to bottom did not happen - a point was not enough. And a test of 1.2103 only took place in the afternoon, which resulted in creating a convenient entry point. As a result, the growth amounted to around 45 points, which led to an update of the 1.2149 level, where I recommended selling the euro immediately on a rebound. The downward correction was about 15 points.

The euro might continue to strengthen today, however, in order to do so, the bulls need to cope with the level of 1.2149. A breakthrough and test of this area from top to bottom after a good inflation report from Italy may create a new entry point into long positions in anticipation of returning to a monthly high in the 1.2180 area, where I recommend taking profit. However, before rushing to buy EUR/USD above the resistance of 1.2149, it is necessary to exclude the divergence, which can be formed on the MACD indicator in the morning, which will limit the pair's upward potential. A more optimal scenario for long positions is a downward correction to the support area at 1.2103. The formation of a false breakout there will be a good entry point into long positions in hopes of continuing the bull market. The lower border of the new rising channel is also located there. In case the bulls are not active: short positions can be safely opened from a large low in the area of 1.2055, counting on an upward correction of 15-20 points within the day.

To open short positions on EUR/USD, you need:

The bears will fight to get the market back under their control, and so, at the beginning, they need to protect the resistance at 1.2149, which they did last Friday. The formation of a false breakout there, together with the divergence on the MACD indicator, creates a new signal to sell the euro in order for it to fall to the area of a large support at 1.2103. A test of this level will pull the pair into a wide horizontal channel and limit the pair's upward potential. A breakthrough and consolidation below this range will be an equally important task. Its renewal from the bottom up will create an additional signal to sell the euro in order to return to the lower border of the channel at 1.2055, where I recommend taking profits. A disappointing report from Italy can help. If bears are not active at the level of 1.2149 this morning, I recommend postponing short positions immediately to a rebound from a large resistance at 1.2180, counting on a downward correction of 15-20 points within the day (I analyzed a similar signal a little higher). The next resistance is only at the new local high in the area of 1.2235.

The Commitment of Traders (COT) report for May 4 showed that both short and long positions have increased, but now there were more buyers, which led to an increase in the overall non-commercial position. Last week, everyone was waiting for the US labor market report and hoped that risky assets would continue to grow, which is what happened. Therefore, the growth in long positions outweighed short ones. The disappointing report further proves that the Federal Reserve will continue to stay on track even with a sharp economic jump. This strategy will keep the pressure on the US dollar and will allow further build-up of long positions in risky assets, which will push EUR/USD upwards. The COT report indicated that long non-commercial positions jumped from 200,415 to 206,472, while short non-commercial positions rose from 119,448 to 121,643. This indicates an influx of new buyers with the expectation that the euro will continue to grow, however with each renewal of the high, there are more and more people willing to sell. The more the euro will show growth this month, the stronger the influx of new sellers will be, as changes in the Fed's monetary policy have not been canceled this year. The total non-commercial net position increased from 80,967 to 84,829. The weekly closing price, on the contrary, declined from 1.20795 to 1.20591.

Indicator signals:

Trading is carried out above 30 and 50 moving averages, which indicates a new upward trend for the euro.

Moving averages

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

Surpassing the upper border of the indicator in the area of 1.2152 will lead to a new wave of euro growth. Surpassing the lower border of the indicator in the area of 1.2120 will increase the pressure on the pair.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
• MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
• Long non-commercial positions represent the total long open position of non-commercial traders.
• Short non-commercial positions represent the total short open position of non-commercial traders.
• Total non-commercial net position is the difference between short and long positions of non-commercial traders.