FX.co ★ EUR/USD: plan for the European session on August 16. COT reports. Euro may bounce back

When to go long on EUR/USD:

Several excellent market entry signals were formed yesterday. I suggest you take a look at the 5-minute chart and figure out what happened. A breakthrough and reverse test of the level of 1.0207 in the second half of the day gave several signals to sell the euro, but the pair came to a major downward movement only in the middle of the US session. As a result, the movement amounted to more than 40 points.

COT report:

Before talking about the further prospects for the EUR/USD movement, let's look at what happened in the futures market and how the Commitment of Traders positions have changed. The Commitment of Traders (COT) report for August 9 logged a sharp increase in both short and long positions, but the former turned out to be more, which continues to indicate the gradual end of the bear market and an attempt to find a market bottom after reaching euro parity against the US dollar. Statistics on inflation in the US came out last week, which turned everything upside down. The first slowdown in inflationary pressure in recent times since reaching a peak of 10.0% has brought back demand for risky assets. But, as you can see on the chart, it didn't last long. The risk of deterioration of the situation associated with the recession of the global economy discourages traders and investors from any desire to build up long positions in the euro. There are no important reports this week that can help the euro regain lost ground, so I would recommend betting more on trading on the horizontal channel. Definitely, before the fall of this year, we can hardly expect serious market shocks. The COT report shows that long non-commercial positions rose by 8,396 to 200,088, while short non-commercial positions jumped by 4,121 to 234,624. At the end of the week, the overall non-commercial net position remained negative, but slightly increased from -39,811 to -34,536, which indicates a continuation of the market turning towards euro bulls. The weekly closing price increased and amounted to 1.0233 against 1.0206.

Today we do not have important statistics on the euro area, which can play on the euro bulls' side, who have lost everything they managed to buy this month in the last three days. Although there is no need to talk about stopping the bearish trend yet, it still needs an upward correction - we will start from this. In case the pair falls, forming a false breakout in the area of 1.0144 after the release of strong data on the business sentiment index from the eurozone ZEW institute and the foreign trade balance will provide another signal to open long positions in hopes of building a correction and updating the resistance of 1.0176. A breakthrough and test down of this range will allow you to get out of the bearish pressure, which will hit the stops, creating another signal to enter long positions with the possibility of a larger move up to 1.0207, where the moving averages play on the bears' side. The farthest target will be the area of 1.0234, where I recommend taking profits. In case EUR/USD falls and no bulls at 1.0144, the pressure on the pair will increase, leading to 1.0115 – the lower limit of the wider horizontal channel that the pair has been in all this month. I recommend buying from this level only on a false breakout. I advise you to open long positions on EUR/USD immediately for a rebound only from 1.0082, or even lower - in the area of 1.0045, counting an upward correction of 30-35 points within the day.

When to go short on EUR/USD:

Yesterday, bears achieved new lows, almost completely crossing out the pair's growth in August. It is obvious that no one is going to leave the market and slow down. A good option for short positions is a false breakout in the nearest resistance area of 1.0176, growth to which may occur after the release of a number of fundamental statistics on the eurozone. All this will lead to a downward movement of the euro to the area of 1.0144, before updating which in today's Asian session was not enough. A breakdown and consolidation below 1.0144, as well as a reverse test from the bottom up - all this creates another sell signal with the removal of bulls' stop orders and a larger movement of the pair to the 1.0115 area. Consolidating below this area is a direct road to 1.0082, where I recommend completely leaving shorts. A more distant target will be the area of 1.0045. If EUR/USD moves higher during the European session, as well as the absence of bears at 1.0176, we can expect a bigger push for the pair. Then I advise you to postpone shorts until 1.0207. Forming a false breakout there will be a new starting point for entering short positions. You can sell EUR/USD immediately for a rebound from the high of 1.0234, or even higher - from 1.0267 with the goal of a downward correction of 30-35 points.

Indicator signals:

Moving averages

Trading is conducted below 30 and 50 moving averages, which indicates the bears' advantage.

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

A breakthrough of the lower border of the indicator in the area of 1.0144 will lead to a fall in the euro. Surpassing the upper border of the indicator in the area of 1.0211 will lead to the euro's growth.

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.