FX.co ★ EUR/USD: trading plan for the American session on May 24 (analysis of morning deals). Euro continues to update monthly lows.

In my morning forecast, I drew attention to the level of 1.0762 and recommended making entry decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The breakthrough in this area occurred, but I have yet to see a retest. For this reason, it was not possible to find suitable entry points. In the second half of the day, the technical picture remained unchanged, as did the strategy itself.

To open long positions on EUR/USD:

Weak IFO data from Germany reminded investors that not everything is going well in the eurozone despite high inflation and high-interest rates, which will continue to rise even during the summer of this year. The euro fell to the area of another monthly low, and as you can see on the chart, there is no significant interest in buying. In the day's second half, there are no statistics, only speeches by Finance Minister Janet Yellen and FOMC member Christopher Waller. It is unlikely that Yellen's cries about running out of money will lead to a return of demand for the euro. The release of the FOMC meeting minutes will not cause significant market changes as the committee is now advocating a completely different policy. Therefore, I expect the euro to continue its decline.

I will consider long positions only after a decline and the formation of a false breakout around the new monthly low of 1.0716, leading to a rise in EUR/USD and a return to the resistance area of 1.0762, which acted as support in the morning. A breakthrough and top-down test of this range will strengthen demand, creating an additional entry point for increasing long positions with an update of the maximum of around 1.0799 and 1.0833. The ultimate target remains the area of 1.0870, where I will take profit. If there are no buyers at 1.0716 in the second half of the day, we can expect further bearish trend development. Therefore, only the formation of a false breakout around the next support level of 1.0674 will signal to buy the euro. I will open long positions immediately on the rebound from the minimum of 1.0634 with a target of a 30-35 point upward correction within the day.

To open short positions on EUR/USD:

Sellers have accomplished their tasks and are currently targeting 1.0716. But before that, it would be good to find an entry point for short positions from the nearest resistance at 1.0762, the defense of which will be the bears' priority. A false breakout at this level will signal to sell and push the pair toward 1.0716. Consolidation below this range and a bottom-up retest will pave the way for a minimum of around 1.0674. The ultimate target will be the area of 1.0634, where profit will be taken. If EUR/USD moves upward during the American session and there are no bears at 1.0762, which will only happen if the Finance Ministry suddenly finds money to pay off debts, buyers will attempt to return to the market. In that case, I will postpone short positions until the levels of 1.0799 and 1.0833. Selling can also be done there, but only after an unsuccessful consolidation. I will immediately open short positions on the rebound from the maximum of 1.0870 with a 30-35 point downward correction target.

In the COT report (Commitment of Traders) for May 16, there was a decrease in long and short positions, but the latter turned out to be much larger. The corrective downward movement of the euro we observed last week remains a good reason to increase long positions. Still, once the issue of the US debt limit is resolved, we will likely see significant demand for risky assets. Traders even ignore statements by Federal Reserve representatives, who unanimously state that the committee will pause the rate hike cycle at the next meeting, which is a bullish signal for the euro. So, as soon as the debt limit issue is resolved, buyers will return to the market, but we need to wait a little longer for a bearish scenario. The COT report shows that non-commercial long positions decreased by only 1,599 to 258,736, while non-commercial short positions decreased by 9,266 to 71,647. As a result, the overall non-commercial net position increased to 187,089 from 179,422. The weekly closing price decreased to 1.0889 from 1.0992.

Indicator signals:

Moving Averages

Trading is conducted below the 30-day and 50-day moving averages, indicating a continuation of the bearish market.

Note: The period and prices of the moving averages considered by the author are based on the hourly chart (H1) and differ from the general definition of classical daily moving averages on the daily chart (D1).

Bollinger Bands

In the case of an upward movement, the upper boundary of the indicator around 1.0785 will act as resistance.

Description of Indicators:

• Moving Average (determines the current trend by smoothing out volatility and noise). Period 50. Marked in yellow on the chart.

• Moving Average (determines the current trend by smoothing out volatility and noise). Period 30. Marked in green on the chart.

• MACD Indicator (Moving Average Convergence/Divergence) - Fast EMA period 12, Slow EMA period 26, SMA period 9.

• Bollinger Bands - Period 20.

• Non-commercial traders - speculators, such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting certain requirements.

• Long non-commercial positions represent the total long open positions of non-commercial traders.

• Short non-commercial positions represent the total short open positions of non-commercial traders.

• The net non-commercial position is the difference between non-commercial traders' short and long positions.