07.05.202108:25 Forex Analysis & Reviews: EUR/USD: plan for the European session on May 7. COT reports. Bulls keep picking up levels. The next target is 1.2091

To open long positions on EUR/USD, you need:

Yesterday was a pretty interesting day for the bulls, but my trading strategy did not show the best results. Let's take a look at the 5 minute chart and see what happened. Even in my morning forecast, I drew attention to the resistance at 1.2025 and recommended making decisions from it. It can be seen how, after an active rise to this level, the pair stops, after which a false breakout is formed, which creates a good signal to open short positions in continuing the current bear market. However, after some time, the bulls still take control over the 1.2025 level and follow the bears' stop orders, which led to such a sharp rise in EUR/USD during the European session. I failed to enter long positions, as I did not wait for the reverse test of the 1.2025 level. Then I waited for resistance to be updated at 1.2059 in the afternoon, which is what happened. After the first test, a false breakout was formed, which resulted in creating a signal to sell the euro. But in such a bull market, all that was obtained was 10 points of a downward movement.

This morning we are waiting for a number of reports on changes in industrial production in the eurozone countries, in particular France and Germany, as well as a speech by the President of the European Central Bank Christine Lagarde. The market ignored yesterday's speech. If the indicators significantly improve, then we can expect the euro to continue rising. Another false breakout in the support area at 1.2059 will lead to a signal to open long positions, which will give the bulls' confidence and allow EUR/USD to get out to the area of a new high at 1.2091. Surpassing this level will be entirely dependent on the US labor market report. A downward test on the 1.2091 level creates another entry point into long positions further along the trend and will open the opportunity for growth to the 1.2118 area, where I recommend taking profits. If the euro is under pressure in the first half of the day after the reports have been published, and the bulls miss support at 1.2059, then in this case, it is best to postpone long positions until the 1.2025 low has been updated, or even lower, until the test of the lower border of the wide horizontal channel at 1.1988, from where you can buy the pair immediately at a rebound based on an upward correction of 15-20 points within the day.

To open short positions on EUR/USD, you need:

Yesterday's report on the European economy and news that world leaders are ready to unite in the fight against coronavirus have increased the demand for the euro. Even the data on the number of initial applications for unemployment benefits in the US did not save the situation, since it fell to 498,000, which is 92,000 less than the revised level of the previous week. Now the bears need to regain control of support at 1.2059. Falling below this level and a test of it from the reverse side from the bottom up creates a fairly good signal to open short positions as opposed to the current bull market with the main goal of falling to the support area of 1.2025, where I recommend taking profits. There are also moving averages that play on the bulls' side. A disappointing report on industrial production from eurozone countries could help with this scenario. It will be possible to speak of surpassing the 1.2025 low only if the market responds adequately to the US labor market report, which is expected in the afternoon. Surpassing 1.2025 will lead to a larger movement of the euro down to the 1.1988 area and the bulls' attempt to reverse the market direction will end there. In case EUR/USD grows in the first half of the day, do not rush to sell. It is best to wait until the 1.2091 high has been updated and a false breakout is formed there, which creates the first entry point into short positions against the trend. If the bears are not active at this level, the best option would be short positions for a rebound from the high of 1.2118, counting on a downward correction of 15-20 points within the day.

The Commitment of Traders (COT) report for April 27 showed that both short and long positions have increased, but there turned out to be more for the latter, which caused overall non-commercial positions to increase. This suggests that players actively buy the euro and one can bet that the pair will strengthen even more after the downward correction. The Federal Reserve's decision on interest rates and monetary policy did not significantly affect the US dollar rate, as well as the next programs proposed by US President Joe Biden to stimulate economic growth in the near future through changes in the tax system. Given that the Fed will continue to adhere to the previous course, even despite the sharp economic jump, risky assets will still be in demand after the decline in the EUR/USD pair earlier this month. The COT report indicated that long non-commercial positions sharply jumped from 197,137 to 200,415, while short non-commercial positions rose from 116,329 to 119,448, indicating an influx of new buyers that expect the euro to continue rising. The more the euro corrects to the downside at the beginning of this month, the stronger the demand is. As a result, the total non-commercial net position sharply rose from 80,808 to 80,967. The weekly closing price continued to rise to 1.20795 from 1.2042 a week earlier.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates the formation of a bull market.

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

Surpassing the upper border of the indicator in the area of 1.2075 will lead to a new wave of growth for the euro. In case it falls, support will be provided by the lower border of the indicator at 1.2040.

Description of indicators

• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
• Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in 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 short and long positions of non-commercial traders.