FX.co ★ EUR/USD: plan for the US session on May 21 (analysis of morning trades)

To open long positions on EURUSD, you need to:

Buyers of the European currency made an unsuccessful attempt to get out of the level of 1.2243. Quite convincing data on the PMI indices of the eurozone countries still did not allow the bulls to break above this level, keeping the pair in a side channel. It indicates the risk of a downward correction of EUR/USD in the second half of the day. In general, the technical picture has not changed compared to the morning forecast and the scenario under which I recommended acting.

In the second half of the day, the focus will shift to data on US PMI indices. Buyers will continue to target the resistance at 1.2243. A real breakout and a test of this area already from top to bottom on the volume can form an entry point into long positions to continue the upward trend in the expectation of updating the next monthly maximum in the area of 1.2294, where I recommend fixing the profits. The next target will be the level of 1.2347. A more optimal scenario for purchases will be a downward correction of EUR/USD to the support area of 1.2205, where the moving averages play on the buyers' side. The formation of a false breakout will be a good entry point to long positions in the expectation of continuing the bull market. In the scenario of stronger data on the US economy and the absence of bull activity in the support area of 1.2205, short positions can be safely opened from a large low of 1.2163 or even lower - in the area of 1.2103, counting on an upward correction of 15-20 points within the day.

To open short positions on EURUSD, you need to:

The bears indicated their position when the bulls tried to return to the resistance level of 1.2243, and the pressure on the euro will gradually increase as long as trading is conducted below this range. In the case of EUR/USD growth in the second half of the day, the formation of a false breakout in the area of 1.2243 will form a signal to sell the euro to decline to the area of the average border of the side channel 1.2205, where the moving averages are located, playing for euro buyers. A break of this level will drag the pair into a downward correction, limiting the further bull market at least for a while. An equally important task will be to consolidate below the range of 1.2205. Strong fundamental data on activity in the manufacturing and services sectors of the United States and the update of the level of 1.2205 from the bottom up will form an additional signal to sell the euro to return to the lower border of the side channel 1.2163, where I recommend taking the profits. The next target will be a minimum of 1.2103. However, such a scenario is unlikely to be possible without serious market shocks. Suppose there is no bear activity at the level of 1.2243 today. In that case, I recommend postponing short positions immediately for a rebound from the large resistance of 1.2294 to expect a downward correction of 15-20 points.

Let me remind you that the COT report (Commitment of Traders) for May 11 showed an increase in both short and long positions, but this time there were more buyers, which led to the continued growth of the overall non-commercial position. Last week, everyone was waiting for data on US inflation, which set the tone. Its sharp increase provided only temporary support to the US dollar. However, traders managed to take advantage of this moment to open long positions after the EUR/USD pair corrected downwards. Only the news that the Fed will raise interest rates will lead to a severe increase in the US dollar. Until then, demand for risky assets will prevail, which will help the euro continue updating its monthly highs in the short term. The COT report shows that long non-profit positions jumped from the level of 206,472 to the level of 223,387, while short non-profit positions rose from the level of 121,643 to the level of 129,480. It indicates an influx of new buyers in the expectation of continued growth of the euro, but there are more and more willing to sell with each update of the maximum. The total non-profit net position increased from the level of 84,829 to the level of 93,907. The weekly closing price also increased significantly, from the level of 1.20591 to 1.21406.

Signals of indicators:

Moving averages

Trading is conducted above 30 and 50 daily moving averages, which still preserves the option of further growth of the euro.

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

Bollinger Bands

A break of the lower limit of the indicator in the area of 1.2214 will decrease the euro. A break of the upper limit of the indicator in the area of 1.2240 will lead to new growth of the European currency.

Description of indicators

• Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
• Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
• MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet specific 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 the short and long positions of non-commercial traders.