FX.co ★ EUR/USD: trading plan for American session on October 11 (analysis of morning trades). EUR climbs slightly

In the morning article, I turned your attention to the level of 0.9685 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and try to figure out what actually happened. After a decline to 0.9685, the bulls asserted strength, which led to a false breakout. It gave a good buy signal. The pair climbed by about 40 pips. A false breakout of 0.9724 provided a sell signal but the downward movement was only 20 pips. After that, the market equilibrium took place. For the second half of the day, the technical outlook has not changed.

Conditions for opening long positions on EUR/USD:

While the pair is trading above the new support level of 0.9678, formed in the morning, bulls will have a chance to regain the upper hand and push the pair to 0.9724. However, the economic calendar is again uneventful in the afternoon, save for speeches of several Fed officials. So, the odds of an upward reversal are slim. Forex traders are likely to pay zero attention to the NFIB Small Business Optimism Index and the speeches of Patrick T. Harker and Loretta Mester. If bulls protect the support level of 0.9678 and a false breakout of this level takes place, similar to one in the morning, there could be another buy signal. The pair may advance to 0.9724. Consolidation above this level and a downward test will undermine the efforts of the bears to regain control. it will give a buy signal with the prospect of a rise to 0.9766. A breakout of this level will also open the path to 0.9805. It will significantly weaken the bearish sentiment. If EUR/USD declines following the hawkish remarks of the Fed policymakers, the price is likely to decrease below 0.9678. After that, it may reach the next support level of 0.9638. It is better to open long positions at this level only after a false breakout takes place. You can buy EUR/USD immediately at a bounce from a low of 0.9592 or 0.9540, keeping in mind an upward intraday correction of 30-35 pips.

Conditions for opening short positions on EUR/USD:

Sellers managed to push the price to the weekly low in the morning, facilitating the downtrend. Now, the main task for the second half of the day is to protect the nearest resistance level of 0.9724, which was tested in the morning. Another false breakout of this level will generate an excellent sell signal with the prospect of a decrease to 0.9678. A breakout below this level will increase pressure on the euro. So, an upward test will give a sell signal, forcing bulls to close Stop Loss orders. The pair could drop to a low of 0.9638. A more distant target will be the support level of 0.9596 where I recommend locking in profits. If EUR/USD rises during the US session and bears show no energy at 0.9724, which is more likely, bulls could regain the upper hand. There might be an upward correction to a high of 0.9766. It is better to open short positions at this level only if a false breakout occurs. You can sell EUR/USD immediately at a bounce from 0.9805 or 0.9841, keeping in mind a downward intraday correction of 30-35 pips.

COT report

The COT report (Commitment of Traders) for October 4 logged a sharp drop in both short and long positions. Many large investors prefer a wait-and-see approach now, especially given mounting geopolitical tensions. It is facilitating demand for the US dollar as a safe-haven currency. Analysts reckon that the euro may soon plunge to new lows versus the greenback amid the latest US Nonfarm Payrolls report and the inflation figures for September. In the near future, risky assets may face strong bearish pressure, dropping to yearly lows. The COT report revealed that the number of long non-commercial positions decreased by 9,345 to 199,391, while the number of short non-commercial positions slid by 19,230 to 155,709. At the end of the week, the total non-commercial net position remained positive and amounted to 43,682 against 33,797. It appears investors are taking advantage of the moment, buying the euro below the parity level. They are also increasing long positions, betting on the improvement in the energy crisis and a long-term rally of the euro. The weekly closing price advanced to 1.0053 against 0.9657.

Signals of technical indicators

Moving averages

EUR/USD is trading below 30- and 50-period moving averages, indicating the continuation of bearish pressure.

Remark. The author is analyzing the period and prices of moving averages on the 1-hour chart. So, it differs from the common definition of classic daily moving averages on the daily chart.

Bollinger Bands

If EUR/USD climbs, the indicator's upper border at 0.9724 will act as resistance.

Definitions of technical indicators

• Moving average recognizes an ongoing trend through leveling out volatility and market noise. A 50-period moving average is plotted in yellow on the chart.
• Moving average identifies an ongoing trend through leveling out volatility and market noise. A 30-period moving average is displayed as the green line.
• MACD indicator represents a relationship between two moving averages that is a ratio of Moving Average Convergence/Divergence. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. A 9-day EMA of the MACD called the "signal line".
• Bollinger Bands is a momentum indicator. The upper and lower bands are typically 2 standard deviations +/- from a 20-day simple moving average.
• Non-commercial traders - speculators such as retail traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements.
• Non-commercial long positions represent the total long open position of non-commercial traders.
• Non-commercial short positions represent the total short open position of non-commercial traders.
• The overall non-commercial net position balance is the difference between the short and long positions of non-commercial traders.