FX.co ★ EUR/USD: plan for the European session on September 8. COT reports. The euro, having updated another annual low, recovered slightly

A large number of excellent market entry signals were formed yesterday, which made it possible to make good money. Let's take a look at the 5-minute chart and see what happened. I paid attention to the 0.9915 level in my morning forecast and advised making decisions on entering the market from it. Pretty good German and eurozone data helped bulls bring the pair back to the 0.9915 area in the morning, but a false breakout at this level and the bulls' inability to gain a foothold above this range all led to a sell signal and a large sell-off of the pair with a fall of 35 points. Closer to the second half of the day, the bulls came to the defense of the large support at 0.9880, where a false breakout gave a buy signal, which pushed the pair to rise by more than 40 points up. Another attempt by the bears to protect 0.9915 was successful. Along with a sell signal, the pair went down about 15 points, but then the pressure eased. By the middle of the US session one could observe an attempt by the bears to protect the resistance of 0.9949, but the matter did not come to a major sell-off.

When to go long on EUR/USD:

Today, the entire focus will be on the European Central Bank meeting and on how aggressively the central bank will continue to raise interest rates. Almost no one doubts that the ECB will raise its key rate by 0.75% today, which will be the sharpest tightening of policy in recent times. This will certainly lead to the strengthening of the euro. But much more important are statements about how fast the central bank plans to tighten policy in the future. If we hear a hawkish tone in the words of ECB President Christine Lagarde, the demand for the euro can only increase. A sharp drop in the pair is not ruled out if the ECB raises rates by only 0.5%, fearing a difficult winter period and the economy sliding into recession. The optimal scenario for buying then would be a false breakout in the new support area of 0.9982, formed as a result of today's Asian session. This will provide an excellent entry point in view of the continuation of the upward correction with the nearest target at 1.0029. As I noted above, only hawkish statements by European politicians, as well as a breakthrough and test from the top to the bottom of this range, will hit the bears' stops, which creates another signal to open long positions with the possibility of a correction to the 1.0076 area. A more distant target will be resistance at 1.0127, where I recommend taking profits.

In case EUR/USD falls and bulls are not active at 0.9982, the pair will be under pressure again. The optimal decision to open long positions in this case would be a false breakout near the low of 0.9949, where the moving averages are, playing on the bulls' side. I advise you to buy EUR/USD immediately on a rebound only from 0.9915, or even lower - in the area of 0.9880, counting on an upward correction of 30-35 points within the day.

When to go short on EUR/USD:

The bears no longer control the market, especially after yesterday's sharp buying by the big players. The bears' main task is to protect the nearest resistance at 1.0029, as having lost control of the parity, the pressure on the euro may ease. A false breakout at this level after the announcement of the ECB's decision on the interest rate will lead to an excellent signal to sell in order to resume the bear market and lower the euro to the 0.9982 area. A breakdown and consolidation below this range with a reverse test from the bottom up creates another sell signal with the removal of bulls' stop orders and a larger fall of the pair to the 0.9949 area, where the moving averages are passing. I recommend taking profit there. A more distant target will be a low of 0.9915.

In case EUR/USD jumps during the European session, as well as the absence of bears at 1.0029, the situation will change dramatically. In this scenario, I recommend postponing short positions to 1.0076, but only if a false breakout is formed there. You can sell EUR/USD immediately for a rebound from the high of 1.0127, or even higher - from 1.0155, counting on a downward correction of 30-35 points.

COT report:

The Commitment of Traders (COT report) for August 30 logged a decline in both short and long positions. If a week ago there was a surge in activity, now there has been a similar decline. This indicates a decrease in investor appetite for risk after the release of the eurozone inflation data, which once again rose to a high in the last ten years. The problem is exacerbated by the energy crisis, as the flow of gas through the Nord Stream is practically suspended - this is another increase in energy prices in the winter and upward inflation surges, which will force the European Central Bank to further raise interest rates and tighten belts. This week we are also waiting for the central bank's decision on interest rates, which may aggravate the euro's position against the US dollar. Even though the rate hike will be considered by investors as a signal for the growth of profitability, at the same time there will be a slowdown in economic growth, which is more important. So don't expect a serious euro recovery in the medium term. The COT report indicated that long non-commercial positions decreased by 8,567 to 202,258, while short non-commercial positions decreased by 5,000 to 249,934. At the end of the week, the total non-commercial net position remained negative and decreased to the level of -47,676 against -44,109, which indicates continued pressure on the euro and further fall of the trading instrument. The weekly closing price slightly recovered and amounted to 1.0033 against 0.9978.

Indicator signals:

Moving averages

Trading is conducted above the 30 and 50-day moving averages, which indicates an upward correction in the pair.

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, the lower border of the indicator around 0.9915 will act as support. In case of growth, the upper border of the indicator in the area of 1.0055 will act as resistance.

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.