FX.co ★ EUR/USD: Trading Plan for the U.S. Session on December 16th (Review of Morning Trades). Euro Trades Around 1.0505

In my morning forecast, I highlighted the 1.0509 level as a key decision point for market entry. Let's look at the 5-minute chart to see what happened. A decline followed by a false breakout at 1.0509 created a good entry point for long positions, but the pair failed to achieve significant growth. The technical picture was adjusted for the second half of the day.

For Opening Long Positions on EUR/USD:

The euro reacted with a slight increase in volatility to mixed PMI data. Growth in activity in the Eurozone's services sector was offset by poor performance in the manufacturing sector, where contraction continued. This highlights the need for economic stimulus and lower interest rates in the Eurozone.

In the second half of the day, similar PMI data for the manufacturing and services sectors, along with the composite PMI for the US, will be released. It's expected that the services sector will continue to support the economy. In case of a decline, I plan to act as I did earlier today. A false breakout near 1.0490, similar to the morning scenario, will provide a good opportunity for long positions targeting a return to 1.0523.

A breakout and retest of this range will confirm a valid entry point for further buying, with the goal of testing 1.0544. The ultimate target will be the 1.0567 high, where I plan to take profits. Testing this level could reignite bullish sentiment for the euro.

If EUR/USD declines and there is no activity around 1.0490 in the second half of the day, pressure on the pair will increase, leading to a more substantial drop. In that case, I will wait for a false breakout near the 1.0458 support level before entering long positions. Alternatively, I plan to buy on a rebound from 1.0430, aiming for an intraday correction of 30–35 points.

For Opening Short Positions on EUR/USD:

If the euro rises on weak US PMI data, protecting the 1.0523 resistance level will be the priority for sellers this afternoon. A false breakout there will reinstate bearish momentum and provide an entry point for short positions targeting support at 1.0490, where moving averages, favoring bulls, are located.

A breakout and consolidation below this range, followed by a retest from below, will offer another opportunity to sell, aiming for the 1.0458 low. This shift will bring the market back into bearish territory. The ultimate target will be the 1.0430 level, where I plan to take profits.

If EUR/USD rises in the second half of the day and bears fail to defend 1.0523, I will postpone short positions until the pair tests the next resistance level at 1.0544. I will sell there only after a failed breakout. Alternatively, I plan to short on a rebound from 1.0567, aiming for an intraday correction of 30–35 points.

Commitments of Traders (COT) Report:

The COT report from December 3 showed a significant increase in both long and short positions, leaving the market's balance largely unchanged. In the near term, crucial US inflation data will determine future Federal Reserve policy and the dollar's trajectory. If inflation data does not surprise significantly, the Fed is likely to lower rates, further weakening the dollar.

The COT report indicated that long non-commercial positions increased by 11,359 to 167,693, while short positions grew by 12,839 to 225,182. As a result, the net position difference decreased by 463.

Indicator Signals:

Moving Averages:Trading is above the 30- and 50-day moving averages, suggesting further growth for the pair.

Bollinger Bands:In case of a decline, the lower boundary of the indicator at 1.0490 will act as support.

Indicator Descriptions:

• Moving Average (MA): Indicates the current trend by smoothing out price volatility and noise. Period – 50 (yellow line) and 30 (green line).
• MACD: Moving Average Convergence/Divergence. Fast EMA – period 12; Slow EMA – period 26; SMA – period 9.
• Bollinger Bands: Period – 20.
• Non-commercial Traders: Speculators like individual traders, hedge funds, and large institutions using the futures market for speculative purposes.
• Long Non-commercial Positions: Represents the total open long positions held by non-commercial traders.
• Short Non-commercial Positions: Represents the total open short positions held by non-commercial traders.
• Net Non-commercial Position: The difference between long and short positions of non-commercial traders.