FX.co ★ EUR/USD: plan for the European session on December 17. COT reports. Euro bulls aiming for 1.1356 and update of 1.1381

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

Several good signals to enter the market were formed yesterday. Let's take a look at the 5-minute chart and figure out the entry points. In my morning forecast, I paid attention to the 1.1301 level and advised you to make decisions from it. Comprehensive data on activity in the manufacturing and services sectors of the eurozone countries in December limited the pair's upward potential, which was observed since the opening of the European session. A breakthrough and consolidation above 1.1301 with reverse test from top to bottom had resulted in forming an excellent entry point into long positions. The upward movement was around 15 points, after which traders began to take profits before the European Central Bank meeting, which caused the pair to fall. The results of the meeting pleased, after which the euro soared up to the 1.1353 area, where a false breakout and a signal to enter short positions formed. I pointed out this possibility in yesterday's afternoon forecast. As a result, the pair sank by 60 points, which resulted in forming another horizontal channel, and so it is necessary to leave this place today.

Today the focus will be on the data for Germany, as well as inflation in the eurozone. It is these reports that will set the direction for the market in the morning. From the bulls' perspective, the optimal entry point into long positions will be to form a false breakout in the 1.1321 area, which was formed at the end of yesterday. An equally important task is to return to a rather important resistance at 1.1356, which has not yet been overcome. Strong data on the German PPI and the eurozone consumer price index will most likely lead to a breakthrough and test of this level from top to bottom, which will form an additional entry point for buying the euro with the prospect of building a new upward trend and updating the upper border of the wider horizontal channel at 1.1381, formed from 30 November. A breakthrough can seriously affect the EUR/USD downward trend, so be very careful at this level. A breakthrough and a downside test of 1.1381 would open the door for larger gains towards the highs of 1.1415 and 1.1442. A further target will be the level of 1.1480 - but this has to be accompanied by a very strong inflationary pressure in the euro area, which will approve the course of the ECB to tighten monetary policy. I recommend taking profit there. If the pair declines during the European session and the bulls are not active at 1.1321, and there, by the way, there are moving averages playing on their side, it is best to postpone long positions until the larger support at 1.1294. I advise you to buy EUR/USD immediately on a rebound from the 1.1266 low, or even lower - around 1.1245, counting on an upward correction of 20-25 points within the day.

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

Bears did their best yesterday and made a serious statement about themselves in the area of major resistance at 1.1356, pulling the pair down by 60 points, but this was not enough. In addition to inflationary indicators, which are likely to rise in the eurozone, data on the indicator of conditions, the current situation and expectations of the German business environment from the IFO institute are expected. A disappointing result could likely return pressure to the euro, leading to a downward correction in the pair. The bears' main task in the first half of the day is to protect the level of 1.1356. Forming a false breakout there, together with weak data for Germany, will lead to the first entry point into short positions against yesterday's bull market in hopes of returning pressure on the pair and a decline to the area of intermediate support at 1.1321, which acts as a kind of middle of a new horizontal channel. There are also moving averages that play on the bulls' side. A breakdown and a test from below 1.1321 will give a signal to open short positions with the prospect of a decline to the 1.1294 area. A further target will be the 1.1266 level, where I recommend taking profits. If the euro grows and the bears are not active at 1.1356, it is best not to rush to sell. The optimal scenario would be short positions when a false breakout is formed in the 1.1381 area - the bears' last hope is to keep the trend under their control. Selling EUR/USD immediately on a rebound is possible from the highs: 1.1415 and 1.1442, counting on a downward correction of 15-20 points.

I recommend for review:

The Commitment of Traders (COT) report for December 7 revealed that short positions decreased and long ones slightly increased, which led to a decrease in the negative delta value. Many traders have been preparing for the central bank meetings this week. Very serious changes are expected in the monetary policy of the Federal Reserve, as well as the European Central Bank. The inflation data is forcing the management to act more aggressively, but knowing which path it will take is rather difficult. Last week, there were several speeches by Fed Chairman Jerome Powell, who in his comments talked enough about the expected changes in monetary policy towards tightening. The Omicron coronavirus strain is also keeping Europeans and Americans awake, dampening demand for risky assets amid uncertainty over the ECB's future policy. The latest November COT report indicated that long non-commercial positions rose from 191,048 to 194,869, while short non-commercials fell from 214,288 to 203,168. important events in the conditions of the formed horizontal channel. At the end of the week, the total non-commercial net position decreased its negative value from -23,240 to -8,299. The weekly closing price, on the contrary, did not change due to the horizontal channel - 1.1283 against 1.1292.

Indicator signals:

Trading above the 30 and 50 day moving averages indicates an attempt by bulls to take control 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

In case of a decline, support will be provided by the lower border of the indicator in the area of 1.1294. A breakthrough of the upper border of the indicator in the area of 1.1356 will lead to a new wave of growth in 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.