FX.co ★ EUR/USD: plan for the European session on July 14. COT reports. Bears seized the initiative after a strong US inflation report. Aim for support at 1.1773

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

And if nothing interesting happened in the market in the first half of the day, then the US inflation report seriously surprised traders, which caused the dollar to strengthen against the European currency. During the European session, I drew attention to the 1.1853 support and to the report on inflation in Germany, which did not meet the expectations of traders and fully coincided with the forecasts of economists. This weighed on the euro. Let's take a look at the 5 minute chart and talk about what happened. It is clearly seen how the bears are pushing through support at 1.1853, but the situation has not reached a normal reverse test of this level from the bottom up. Therefore, there were no signals to enter the market in the first half of the day.

In the second half of the day, after a sharp decline in the European currency, the bulls managed to protect support at 1.1793, where forming a false breakout created an excellent signal to open long positions. As a result, there was a rebound to the upside by 30 points. But the bears started to be active again as soon as the pair approached the resistance at 1.1826. Failure to settle at 1.1826 created a signal to open short positions. Then we watched the euro fall along the newly formed trend, which subsequently led to a breakdown of the low of 1.1793 with a decline to the 1.1769 area.

A rather hot day awaits us today. A report on changes in the volume of industrial production in the eurozone will be released in the morning, which may put additional pressure on the euro. Therefore, the main task of the EUR/USD bulls is to protect support at 1.1773. Forming a false breakout there generates a signal to open long positions against the newly formed trend. The formation of divergence on the MACD indicator after updating the week's lows will also benefit the euro bulls. The estimate will be for a recovery to the area of the intermediate level at 1.1799. Good data on industrial production growth rates could lead to a breakdown of this range. However, I recommend opening long positions above 1.1799 only this level has been tested from top to bottom, which creates another buy signal in order to restore EUR/USD to the large resistance at 1.1824, where I recommend taking profits. There are also moving averages that play on the side of the bears. This will slightly limit the pair's upward potential. In case the bulls are not active in the 1.1773 area, I advise you to wait for the update of the new major support at 1.1740, or the next low at 1.1715 from where you can buy EUR/USD immediately on a rebound, counting on an upward correction of 15-20 points within the day.

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

The bears managed to regain control of the market, although they were one step away from letting it go. Focus in the first half will be at 1.1773. Consolidating below this range and a test of this area from the bottom up can create a good signal for you to open new short positions in continuation of the downward trend and for the purpose of pulling down the pair to new lows of 1.1740 and 1.1715, where I recommend taking profits. A disappointing report on industrial production in the euro area could push the euro to a low like 1.1682. But, before selling the euro, pay attention to the divergence of the MACD indicator, the formation of which can spoil the bears in the morning. If EUR/USD grows during the European session, an equally important task for the bears is to protect the resistance at 1.1799. Forming a false breakout there creates an entry point for short positions. If the bears are not active there, then it is best to postpone selling until the test of the larger resistance at 1.1824, where you can immediately sell the pair on a rebound, counting on a downward correction of 15-20 points. There are also moving averages that play on the side of the bears.

We could observe a reduction in the overall positive net position in the Commitment of Traders (COT) report for July 6, and this was due to the sharp rise in short positions. This balance of power does not take into account the growth that was observed at the end of last week after the ECB raised its inflation target to 2.0% and admitted that it will allow inflation to exceed the target for quite some time in the future. This turned out to be enough for the bulls to start building up long positions. Now the focus will be on the ECB meeting, which will be held on July 22, and at which changes in monetary policy will be announced. Until then, any decline in the European currency will be seen as a good reason to build up long positions. The COT report indicated that long non-commercial positions rose from 209,058 to 212,998, while short non-commercial positions rose from 121,912 to 135,808. No important fundamental reports for the euro area this week, so the focus will shift to US inflation and retail sales. Further direction depends on these indicators. But whatever they are, the key to the growth of the European currency is the economic recovery in the summer, so I recommend betting on the growth of risky assets. The total non-commercial net position declined from 87,146 to 77,190. The weekly closing price dropped from 1.1928 to 1.1862.

Indicator signals:

Trading is carried out below 30 and 50 moving averages, which indicates a renewed bearish 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

In case of growth, the upper border of the indicator in the area of 1.1849 will act as a resistance. The lower border of the indicator around 1.1745 will act as a support.

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.