In my morning forecast, I pointed out the level of 1.0832 and planned to make decisions based on it for market entry. Let's look at the 5-minute chart and figure out what happened there. The rise and the formation of a false breakout at this level provided an excellent entry point for short positions. However, the pair did not experience a significant drop, indicating traders' cautious stance ahead of important US statistics. Considering that trading remained within a sideways channel, the technical picture was not revised for the second half of the day.
To open long positions on EURUSD, the following is required:
The data on the growth rate of the European economy in the first quarter of this year matched forecasts, leading to market sluggishness, as there were no other reasons to act more actively, especially ahead of important US data. All attention in the second half of the day should be focused on the US Consumer Price Index and Retail Sales Volume Change. The Empire Manufacturing Index will complement the range of important statistics. Inflation growth will trigger a decline in the euro, while weakening and price decreases, especially in the core index, will lead to a new wave of strengthening for EUR/USD, which, as you have already seen in the first half of the day, traders are counting on. In case of strong data, I will act around the support level of 1.0805, formed at the end of yesterday. Forming a false breakout will be a suitable option for entering the market with the expectation of another rise towards 1.0832, where trading is currently taking place. Breaking and updating this range from top to bottom will strengthen the pair with a chance of a surge to 1.0857 – a new monthly high. The ultimate target will be the maximum of 1.0884, where I will take profit. In the scenario of EUR/USD decline and lack of activity around 1.0805 in the second half of the day, where the moving averages are also located, playing in favor of buyers, pressure on the pair will return, leading to a larger decline. In such a case, I will enter only after forming a false breakout around the next support at 1.0778, which performed excellently yesterday. I plan to open long positions immediately on a rebound from 1.0753 with a target of a 30-35 point upward correction within the day.
To open short positions on EURUSD, the following is required:
Sellers attempted, but it turned out quite weak. The lack of pressure on the pair after an unsuccessful breakout above 1.0832 indicates concerns about developing a more powerful upward correction. For this reason, it is better to wait for US data and then act based on the figures received and the market reaction. Only another defense at 1.0832 after the reports, similar to what I analyzed above, will be a suitable scenario for opening short positions with the prospect of the euro decline and updating support at 1.0805. Breaking and consolidating below this range and a reverse test from bottom to top will provide another selling point, with the pair moving towards the minimum of 1.0778, where euro buyers were very active yesterday. The ultimate target will be a minimum of 1.0753, where I will take profit. Testing this level will indicate the pair being locked in a sideways channel. In case of upward movement of EUR/USD in the second half of the day, and also the absence of bears at 1.0832, which is most likely, buyers will have a chance to establish a new bullish market. In this case, I will postpone selling until testing the next resistance at 1.0857. I will also sell there, but only after an unsuccessful consolidation. I plan to open short positions immediately on a rebound from 1.0884 with a 30-35 point downward correction target.
In the COT report (Commitment of Traders) for May 7, there was a decrease in short positions and an increase in long ones. All this indicates that demand for risky assets persists after the central bank meetings but remains quite weak. The fact that the number of long and short positions is almost equal also indicates the absence of an advantage for either side, which is confirmed by the chart. Now, traders will await new statistics and benchmarks, and until then, trading will continue within a sideways channel, with a slight advantage for buyers of risky assets. The COT report indicates that long non-commercial positions increased by 3,409 to 170,594, while short non-commercial positions plummeted by 7,958 to 166,004. As a result, the spread between long and short positions increased by 2,295.
Indicator signals:
Moving Averages
Trading is above the 30 and 50-day moving averages, indicating further pair growth.
Note: The author considers the period and prices of moving averages on the hourly chart H1, which differs from the general definition of classical daily moving averages on the daily chart D1.
Bollinger Bands
In case of decline, the lower boundary of the indicator, around 1.0805, will act as support.
Description of indicators:
- Moving average (determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.
- Moving average (determines the current trend by smoothing 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 are speculators such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions represent the total long open position of non-commercial traders.
- Short non-commercial positions represent the total short open positions of non-commercial traders.
- The total non-commercial net position is the difference between non-commercial traders' short and long positions.
