FX.co ★ EUR/USD: plan for the European session on November 18. COT reports. Euro stays within the channel

Several market entry signals were formed yesterday. Let us take a look at the 5-minute chart to figure out what happened. Earlier, I asked you to pay attention to 1.0384 to decide when to enter the market. Growth to this level occurred quite quickly in the first half of the day. It seems that the pair also settled in this level, but I decided not to buy the euro amid the lack of inflation targets. In the afternoon, the data pointed to a decrease in inflation in the eurozone, which weakened the euro's position and caused the pair to fall. A false breakout at 1.0333 gave a buy signal and hope for growth, but the upward movement was about 20 points, afterwards the pair was under pressure again. A breakout and reverse test from below 1.0333 has already led to a sell signal. But even there, after the pair dropped by 20 points, the bulls began to actively buy out new lows.

When to go long on EUR/USD:

Yesterday's good data on the real estate market in the US strengthened the dollar, but the bulls seized the moment and bought the correction, keeping the pair in the horizontal channel. We don't expect anything this morning except for European Central Bank Christine Legarde's speech, who will certainly try to maintain a balance between raising interest rates and the growth of the eurozone economy. Yesterday's inflation data pointed to a slowdown in prices, making Lagarde's plans a little easier. In case of a negative reaction to her statements, the optimal scenario for opening long positions in the current conditions will be a false breakout in the area of the nearest support at 1.0323, by analogy with what I analyzed above. This will help ensure that there are big players in the market, betting on the euro's succeeding growth, and will return the pair to the level of 1.0384, which is currently being traded. In the event of a breakout and test downwards of this range, I will bet on a second push to the high of 1.0432. Above this range, we have the 1.0478 level – a monthly high. A breakout of this level would hit the bears' stops and form a buy signal with the possibility of pushing the pair to the 1.0525 area, which will strengthen the bullish trend by the end of this week.

If the pair falls and bulls fail to protect 1.0323, the pressure on the euro will increase, but nothing terrible will happen. This will only lead to a downward movement to the area of the next support at 1.0276, which acts as a kind of lower limit of the horizontal channel. I also advise you to open longs there only on a false breakout. It is also possible to go long after a bounce from 1.0227, or even lower - at 1.0180, expecting a rise of 30-35 pips.

When to go short on EUR/USD:

Obviously, the bears are doing their best to push the euro as low as possible. If the bears are counting on something today, then they need a false breakout in the area of the nearest resistance at 1.0384. This will give, albeit not excellent, an entry point, and will allow you to go down to support 1.0323. The pair can settle in this level in case we receive very dovish statements from Lagarde, who is set to speak this afternoon. A reverse upward test of 1.0323 will be a reason to sell EUR/USD already with the goal of removing bullish stop orders and a larger fall to the 1.0276 area, where the bulls will become active again and begin to win back the decline.

The farthest target will be the area of 1.0227, where I recommend locking in profits. If EUR/USD moves up during the European session and bears fail to protect 1.0384, the demand for the pair will increase, which will support the bull market and an update of 1.0432. In this case, I advise you not to rush into selling: I recommend opening short positions there only on a false breakout. It is also possible to go short after a rebound from the high of 1.0478, or even higher - from 1.0525, expecting a decline of 30-35 pips.

COT report:

According to the Commitment of Traders (COT) report for November 8, both short and long positions increased. These data do not take into account the market situation after the release of US inflation data, so you should not trust the current COT data much. Price growth merely slowed down – it did not decrease. Even though US inflation slowed down to a larger degree than previously anticipated, the Federal Reserve will continue to follow its policy and raise interest rates. The Fed funds rate is expected to be increased by 0.5%-0.75% in December. As for the euro, the demand for risky assets has indeed grown slightly. However, besides the Fed potentially slowing down monetary tightening, another key factor is the further increase in interest rates in the eurozone. More European politicians have stated recently that interest rates should be hiked further to deal with rising inflation. However, if the EU economy continues to contract at a rapid pace, aggressive rate hikes can be halted, which will limit the upward potential of the pair in the medium term. The COT report indicated that long non-commercial positions decreased by 7,453 to 232,317, while short non-commercial positions fell by 9,262 to 124,718. At the end of the week, the total non-commercial net position remained positive and stood at 107,599 against 105,790 a week ago. This indicates that investors continue to take advantage of the situation and buy cheap euro even above parity. They also accumulate long positions, expecting the crisis to end and the pair to recover in the long term. The weekly closing price increased to 1.0104 from 0.9918.

Signals of indicators:

Moving averages

Trading is performed in the 30- and 50-day moving averages, which indicates market uncertainty.

Note: The period and prices of moving averages are considered by the author on the one-hour chart, which differs from the general definition of the classic daily moving averages on the daily chart.

Bollinger Bands

If the euro/dollar pair rises, the upper limit of the indicator located at 1.0384 will act as resistance. If the pair drops, the lower limit of the indicator around 1.0323 will act as support.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph.
• MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9.
• Bollinger Bands. The period is 20.
• Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
• Long non-commercial positions are the total number of long positions opened by non-commercial traders.
• Short non-commercial positions are the total number of short positions opened by non-commercial traders.
• The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.