FX.co ★ EUR/USD: trading plan for European session on August 11. Commitment of Traders. EUR bulls spooked by inflation data

Yesterday, there were several trading signals. Let's look at the 5M chart and figure out what actually happened. In my morning article, I turned your attention to 1.0996 and recommended making decisions with this level in focus. A rise and a false breakout of this level gave an entry point into short positions. However, the euro did not fall. Traders had to activate Stop Loss orders. In the afternoon, a false breakout of 1.1030 provided another entry point. The downward movement totaled only 15 pips.

When to open long positions on EUR/USD:

Yesterday, the US unveiled its inflation data which caused a strong market reaction. On the one hand, the reading increased but it also turned out to be slightly lower than forecasts, which led to a surge in volatility. Nevertheless, dollar bulls remained in control. Today, there are no important reports in the morning. The focus will be only on the CPI of France and Spain. The euro will hardly be able to rebound. So, I would prefer to act only after the decline and a false breakout of the new support level of 1.0969 formed by the results of yesterday. This will give a buy signal based on an upward movement. The pair may reach the resistance level of 1.1013. A breakout and a downward retest of this range amid strong inflation data for the eurozone will stimulate demand for the euro. The pair is likely to climb to a high of 1.1060. a more distant target will be the 1.1106 level where I recommend locking in profits.

If EUR/USD declines and bulls fail to protect 1.0969, which is quite possible, especially after yesterday's sharp sell-off of the euro, the enthusiasm of the bulls may wane very quickly at the end of the week. In this case, only a false breakout of the support level of 1.0931 will give new entry points into long positions. You could buy EUR/USD at a bounce from 1.0904, keeping in mind an upward intraday correction of 30-35 pips.

When to open short positions on EUR/USD:

Sellers have a chance of maintaining a bear market. They need to defend the resistance level of 1.1013. A breakout of this level is likely to take place in the morning. I will act only after a false breakout of 1.1013, which will lead to a fall the support level of 1.0969. Only after a breakout and consolidation below this level amid weak EU inflation data as well as an upward retest, there could be a sell signal. The pair may fall to a low of 1.0931. A more distant target will be the 1.0904 level which will indicate the formation of a bearish trend. At this level, I would recommend locking in profits. If EUR/USD rises during the European session and bears fail to defend 1.1013, the bulls will try to regain the upper hand. I would advise you to postpone short positions until a false breakout of the resistance level of 1.1060. You could sell EUR/USD at a bounce from 1.1106, keeping in mind a downward intraday correction of 30-35 pips.

COT report

According to the COT report (Commitment of Traders) for August 1, there was a decline in both long and short positions. All this happened after the meetings of the Federal Reserve System and the European Central Bank. Now, traders are focused on fresh macro stats that will allow them to more accurately predict the Fed's future plans for monetary policy. In the near future, the US will release inflation data. A further decrease will certainly allow the Fed to take a break in September, while a rise in the index, on the contrary, will spark even more talk about the need for further tightening. It will be extremely bullish for the US dollar. Even despite the downward correction, in the medium term, it is better to open long positions on the decline. The COT report showed that long non-commercial positions decreased by 10,573 to 240,074, while short non-commercial positions fell by 5,405 to 68,012. As a result, the spread between long and short positions dropped by 4,894, which benefits the sellers. The closing price dipped to 1.0999 against 1.1075 a week earlier.

Indicator signals:

Moving averages:

Trading is carried out near the 30-day and 50-day moving averages, which indicates market uncertainty.

Note: The author considers the period and prices of moving averages on the H1 (1-hour) chart that differ from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

If EUR/USD declines, the indicator's lower border at 1.0965 will serve as support.

Indicator description:

• Moving average (MA) determines the current trend by smoothing volatility and noise. Period 50. Colored yellow on the chart.
• Moving average (MA) determines the current trend by smoothing volatility and noise. Period 30. Colored green on the chart.
• Moving Average Convergence/Divergence (MACD). Fast EMA 12. Slow EMA 26. SMA 9.
• Bollinger Bands. Period 20
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements.
• Long non-commercial positions are the total long position of non-commercial traders.
• Non-commercial short positions are the total short position of non-commercial traders.
• Total non-commercial net position is the difference between the short and long positions of non-commercial traders.