In my morning article, I turned your attention to 1.0716 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and figure out what actually happened. A breakout and an upward retest if this level gave a sell signal, which resulted in a downward movement of 25 pips. For the afternoon, the technical outlook was revised.
When to open long positions on EUR/USD:
The pressure on the euro returned after weak macro stats on Germany's factory orders for the second month in a row. It means that the economic expansion is likely to slow down. Retail sales in the eurozone decreased, which was also a bearish factor for the euro. It is now aiming at weekly lows. Given that there the US will not publish any economic reports in the afternoon, the bulls will have chances to regain ground. However, I would advise you to go long on a decline.
A false breakout of the weekly low of 1.0672 will indicate that there are those who are willing to push the euro higher. It could generate new entry points into long positions. The pair may grow to 1.0714 where the moving averages are passing in negative territory. A breakout and a downward retest of this level will stimulate demand for the euro, giving an additional entry point into long positions. The euro is likely to rise to a high of 1.0749. A more distant target will be the 1.0778 level where I recommend locking in profits. If EUR/USD declines and bulls fail to defend 1.0672, which is also possible, bears may regain control. Therefore, only a false breakout near the high of 1.0637 will give new entry points into long positions. You could sell EUR/USD at a bounce from 1.0595, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Bears have taken the upper hand. They are not going to give up until the pair dips to the weekly low. However, there will be no economic reports from the US today. This is why the pair has a chance to rebound. It would be wise to open short positions only on the correction after an unsuccessful consolidation above the resistance level of 1.0714. A false breakout of this level will give a sell signal that could push the pair to a new low of 1.0672. At this level, bulls are likely to enter the market. If the pair does climb from 1.0672, a consolidation below this level as well as an upward retest will trigger a decline to 1.0637. A more distant target will be the 1.0595 level where I recommend locking in profits.
If EUR/USD rises during the American session and bears show no energy at 1.0714, bulls are sure to regain ground. In this case, I would advise you to postpone short positions until a false breakout of 1.0749. You could sell EUR/USD at a bounce from 1.0778, keeping in mind a downward intraday correction of 30-35 pips.
According to the COT report (Commitment of Traders) for May 30, there was a decline in long and short positions. However, a drop in long positions was bigger. It indicates falling demand for risk assets. Traders are unwilling to buy the euro due to fears of a slowdown in the European economy and a recession. What is more, the ECB sticks to aggressive monetary tightening even despite the first signs of a steady decline in inflation. Therefore, they prefer a wait-and-see approach. Meanwhile, the US labor remains resilient. Even if the Fed takes a pause in June, it is likely to keep raising rates, boosting demand for the US dollar. The COT report showed that long non-commercial positions decreased by 8,253 to 241,817, while short non-commercial positions fell by 242 to 76,092. At the end of the week, the total non-commercial net position amounted to 163,054 against 185,045. The weekly closing price slipped to 1.0732 against 1.0793.
Indicators' signals:
Trading is carried out below the 30 and 50 daily moving averages, which indicates the likelihood of a further decline.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If EUR/USD rises, the indicator's upper border at 1.0730 will serve as resistance.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked green on the chart.
- MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial speculative traders, 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 position of non-commercial traders.
- Total non-commercial net position is the difference between the short and long positions of non-commercial traders.
