FX.co ★ EUR/USD: plan for the European session on May 31. COT reports. Euro bulls continue to enjoy any good correction for a set of positions

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

A bearish scenario was realized in the market last Friday, however, euro bulls quickly recovered, taking advantage of a good moment to set long positions. Let's take a look at the 5 minute chart and break down the entry points.

In the first half of the day, it is clear that the bears are trying to settle below the 1.2179 range, which leads to forming a signal to open long positions. However, weak data on GDP in France and the index of consumer confidence in the eurozone, which remained unchanged, did not make it possible for the euro to properly recover. As a result, the upward movement from the level was about 20 points and the growth ended there.

In the second half of the day, the price went beyond 1.2179, however, it was not possible to get a good entry point for short positions from it due to the absence of a reverse test of this level from the bottom up. We did not even reach support at 1.2126, from where I recommended opening long positions immediately on a rebound. As a result, after returning and consolidating at the level of 1.2179, another signal to buy the euro was formed in the afternoon, and then the pair recovered by 20 points, when the market closed.

The fact that the bulls were able to fight back such a strong push at the end of last week leaves hope for a continuation of the upward trend in the euro next month. Today the day promises to be quite calm, and a report on inflation in Germany for May this year, where a slowdown in growth is expected, will be released in the afternoon and it can lead to a surge in volatility. If the data coincide with the forecasts of economists, then the pressure on the euro may return, and the bulls will have to once again defend the support at 1.2179. Forming a false breakout there creates a signal to open long positions in continuation of the bull market, but the main goal is to return the resistance at 1.2214, which they did not reach last Friday. A breakthrough and test of this area from top to bottom can create a new entry point into long positions in continuation of the upward trend, counting on the renewal of the monthly high to the 1.2261 area, where I recommend taking profits. The next target will be the area of 1.2313, but it will not be so easy to reach this level. It is not necessary to count on good data on the eurozone in the first half of the day, since only the report on the volume of lending to the private sector in the eurozone will be of significant importance for the market. If the bulls are not active in the support area of 1.2179, then it is best to postpone short positions until a new large low in the 1.2134 area has been updated, counting on an upward correction of 15-20 points within the day.

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

The bears will struggle to continue the downward correction they formed last Friday. To do this, they need to push for a breakthrough below the level of 1.2179. Most likely, another test of this area, which may take place in the near future, will lead to a breakthrough of the range, and a reverse test from the bottom up (which I did not wait for last Friday) will create a good signal to open new short positions in continuation of the downward trend. Disappointing reports on inflation in Italy and lending in the euro area is unlikely to put pressure on the euro, but will be a signal for a bearish scenario. In this case, the closest target will be the area of 1.2134, where I recommend taking profits. The next target is the support at 1.2085. If EUR/USD grows in the first half of the day and volatility remains low after the reports are published, forming a false breakout in the area of 1.2214 will generate a new signal to sell the euro, counting on a decline to the lower border of the horizontal channel and its breakdown. If the bears are not active in the area of 1.2214, I recommend postponing short positions until the resistance of 1.2261 is updated, where you can open short positions immediately on a rebound, counting on a downward correction of 15-20 points within the day. The next major resistance is only at a new local high around 1.2313.

The Commitment of Traders (COT) report for May 18 revealed that both short and long positions increased, but this time there were more bulls, which caused overall non-commercial positions to rise. Last week, everyone was waiting for economic indicators for the eurozone, namely data on inflation and GDP growth rates. The reports were in line with economists' forecasts, which made it possible for the euro to at least maintain the pair's upward potential. The release of the minutes of the Federal Reserve meeting pushed risky assets to fall, as there were ghostly hints among the committee members about the curtailment of the bond purchase program. However, the next day the entire fall was won back. By the end of the week, the pressure on the euro returned after European Central Bank President Christine Lagarde said that it was not time to roll back stimulus support in the eurozone. The data released over the past week did not worry traders much, since all the attention is now focused on the monetary policy of central banks. Apparently, only the news that the Fed is seriously going to reduce the volume of purchases of bonds can lead to a serious growth of the US dollar. Until then, with each decline from the pair, the demand for risky assets will return, which will help the euro in the short term and further renew its monthly highs. The COT report indicated that long non-commercial positions jumped from 223,387 to 232,330, while short non-commercial positions rose from 129,480 to 132,472. This indicates an influx of new buyers in hopes that the euro will continue to rise, however with each renewal of the high, there are more and more people willing to sell. The total non-commercial net position rose from 93,907 to 99,858. The weekly close also increased from 1.21406 to 1.21564.

Indicator signals:

Trading is carried out in the area of 30 and 50 moving averages, which indicates some uncertainty with the future direction of the market.

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

Growth will be limited in the area of the upper border of the indicator in the area of 1.2220. In case the euro falls, support will be provided by the lower border at 1.2150.

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.