FX.co ★ EUR/USD: trading plan for European session on September 8, 2023. COT report and overview of yesterday's trades. Euro recovers after updating 1.0700

Yesterday, the pair formed several entry signals. Let's see what happened on the 5-minute chart. In my morning review I mentioned the level of 1.0709 as a possible entry point. A decline and a false breakout at this level produced a buy signal, but amid weak reports and lack of demand for risky assets, the pair did not rise. In the afternoon, a breakthrough and retest of the same mark meant a sell signal, but after falling by 15 pips, the euro was in demand again.

For long positions on EUR/USD:

Strong US labor market data and remarks from Federal Reserve officials exerted pressure on the euro and single currency fell to the 1.0700 level, but by the end of the day, traders bought on the dip, and in today's Asian session, the bulls regained control over 1.0709. France's industrial production stands as the sole report in the first half of the day, which traders are not interested in, so the euro has a chance to correct at the end of the week. Given the market trend, I will act on a decline after a false breakout near support at 1.0709. This will confirm the entry point for long positions, targeting a recovery towards 1.0748, which performed flawlessly. A breakout and a downward test of this range, bolstered by good data from the eurozone will increase demand for the euro, providing a chance for a surge to 1.0772. The furthest target would be the 1.0798 area, where I plan to take profits. If EUR/USD declines and there is no activity at 1.0709, bears will try to regain market control. In such a case, only a false breakout around 1.0669 will signal a buying opportunity. I will open long positions directly on a rebound from 1.0637, aiming for an upward correction of 30-35 pips within the day.

For short positions on EUR/USD:

Sellers continue to dominate the market, although they slightly loosened their grip after the bulls regained control over 1.0700. All they need to focus on in the first half of the day is defending the level of 1.0748. A false breakout of this mark will give a sell signal, paving the way towards the 1.0709 support level. Only after breaching this range and settling below it, and after completing an upward retest, do I anticipate another sell signal with a target at 1.0669, where I expect significant buyer activity. The furthest target is the 1.0637 area, where I plan to take profit. If EUR/USD moves upwards during the European session and bears are absent at 1.0748, which is more likely in the first half of the day, bulls will have a chance to build an upward correction against the bearish trend. In such a scenario, I would delay short positions until the price hits the new resistance at 1.0772. I would also consider selling there but only after an unsuccessful consolidation. I will open short positions directly on a rebound from the high of 1.0798, considering a downward correction of 30-35 pips.

COT report:

The COT report for August 29 indicates a reduction in long positions and an increase in short ones. Such market shifts mirror the hawkish remarks made by the Federal Reserve Chairman Jerome Powell at the Jackson Hole Symposium. The recently released data on the US Personal Consumption Expenditures Index and the labor market have further convinced investors that the Fed might need to hike rates once more, thus preserving the dollar's allure. Interestingly, the euro's decline offers a compelling point of entry. In the present circumstances, an optimal medium-term strategy remains to buy risk assets on dips. The COT report reveals that the non-commercial long positions decreased by 8,849 to stand at 230,542, while the non-commercial short positions jumped by 3,232 to 83,863. Consequently, the spread between long and short positions expanded by 4,753. The closing price dropped to 1.0882 from 1.0866, indicating a bearish market.

Indicator signals:

Moving averages:

Trading is taking place around the 30 and 50-day moving averages, indicating that the bulls are trying to return to the market.

Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.

Bollinger Bands

If EUR/USD declines, the indicator's lower border around 1.0685 will serve as support.

Description of indicators:

• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;

• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;

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

• Bollinger Bands: 20-day period;

• 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 represent the total number of long positions opened by non-commercial traders;

• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;

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