FX.co ★ EUR/USD: trading plan for European session on December 25, 2023. COT report and overview of previous trades. The dollar didn't stand a chance

Last Friday, the pair formed several entry signals. Let's have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.0931 as a possible entry point. The pair fell, but a false breakout was not formed on this mark. The pair went through low volatility during the day, which explains the lack of entry points. In the afternoon, the US inflation report was published. A false breakout at 1.1004 generated a buy signal, which sent the pair up by more than 25 pips. Safeguarding the resistance at 1.1041 produced a sell signal. As a result, the pair fell by 40 pips.

For long positions on EUR/USD

US data showed a decline in the Personal Consumption Expenditure index, and this exerted pressure on the US dollar, although the market initially reacted with small short positions. A decline in consumer spending and a sharp 12.2% collapse in primary home sales in November did not inspire optimism either. Despite all that, EUR/USD continued to trade within the previous price channel, and the pair continues to stay in this area today due to the Christmas holiday. Also, the economic calendar is empty. After the start of trading, I expect the pressure to return. I will act after a false breakout forms in the support area of 1.1004, which will produce a signal with the goal of pushing the pair in the area of 1.1041. A breakout and a downward test of this range will produce a buy signal, offering a chance to support the uptrend and test 1.1073. The furthest target would be a new high at 1.1109, where I plan to take profits. If EUR/USD declines and there is no activity at 1.1004, we can expect a sharp fall. In this case, it will be possible to enter the market after forming a false breakout near 1.0972. I will open long positions immediately on a rebound from 1.0937, bearing in mind an upward correction of 30-35 pips within the day.

For short positions on EUR/USD:

At the moment, the most suitable scenario is to form a false breakout near 1.1041. Having received a sell signal from there, I expect to update the nearest support at 1.1004. After a breakout and consolidation below this range, as well as an upward retest, do I expect another sell signal at 1.0972. The lowest target will be 1.0937, where I will take profits. In case of an upward movement of EUR/USD during the European session, as well as the absence of the bears at 1.1041, I will postpone selling the pair until the price tests the next resistance at 1.1073. There, selling is also possible but only after a false breakout. I will open short positions immediately on a rebound from 1.1109 aiming for a downward correction of 30-35 pips.

COT report:

The COT report for December 12 indicates a decrease in long positions and an increase in short ones. Obviously, the Federal Reserve's December meeting and its sudden pivot together with the European Central Bank's tough stance had a minor effect on the positioning of major players, as buyers of risky assets clearly have the advantage. A number of reports related to inflation in the eurozone and the US will be released soon, which will throw light on the Fed's stance on 2024. But whatever the data, we will expect further growth from the euro in the medium term. The COT report indicated that long non-commercial positions fell by 3,847 to 231,837, while short non-commercial positions increased by 1,186 to 84,510. As a result, the spread between long and short positions decreased by 3,599.

Indicator signals:

Moving averages:

Trading above the 30- and 50-day moving averages indicates a possible uptrend

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 near 1.0990 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.