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To open long positions on EUR/USD, you need:
Only one signal to enter the market was formed yesterday. In the afternoon, the volatility was low enough that it was not possible to update any of the levels I indicated. Let's take a look at the 5 minute chart and talk about what happened. It is clear that the bears are trying to fall below the 1.2141 level, but the bulls are quickly forming a false breakout and taking this area under their control. Then there is a reverse test of this level already from top to bottom, which creates a signal to open long positions in continuation of the bullish trend market. As a result, there is a rapid movement to the resistance area of 1.2181, to which we have not reached yet. The upward movement was more than 30 points.
Before talking about the further prospects for the EUR/USD movement, let's look at what happened in the futures market and see how the Commitment of Traders (COT) positions have changed. The COT report for May 4 showed that both short and long positions have increased, but now there were more buyers, which led to an increase in the overall non-commercial position. Last week, everyone was waiting for the US labor market report and hoped that risky assets would continue to grow, which is what happened. Therefore, the growth in long positions outweighed short ones. The disappointing report further proves that the Federal Reserve will continue to stay on track even with a sharp economic jump. This strategy will keep the pressure on the US dollar and will allow further build-up of long positions in risky assets, which will push EUR/USD upwards.
The COT report indicated that long non-commercial positions jumped from 200,415 to 206,472, while short non-commercial positions rose from 119,448 to 121,643. This indicates an influx of new buyers with the expectation that the euro will continue to grow, however with each renewal of the high, there are more and more people willing to sell. The more the euro will show growth this month, the stronger the influx of new sellers will be, as changes in the Fed's monetary policy have not been canceled this year. The total non-commercial net position increased from 80,967 to 84,829. The weekly closing price, on the contrary, declined from 1.20795 to 1.20591.
The bears managed to form a downward correction yesterday afternoon and the pair's succeeding direction will depend on today's eurozone report. Bulls need to defend support at 1.2105. Forming a false breakout there will be a signal to open long positions in continuation of the upward trend that was formed at the end of last week. Good reports on the index of business sentiment from the ZEW Institute for Germany and the euro area will allow the bulls to regain the level of 1.2149, which was formed in yesterday's US session. A breakthrough and consolidation above this range with a reverse test from top to bottom creates a signal to open new long positions in hopes of continuing the upward trend in a high like 1.2177, where I recommend taking profits. The next target will be the level of 1.2235, but one can hardly bet on such an active growth without good macroeconomic reports for the eurozone. If the bulls are not active in the 1.2105 in the first half of the day, then we can expect EUR/USD to sharply fall. In this case, I recommend opening long positions only for a rebound from a low like 1.2060, counting on an upward correction of 20-25 points within the day.
To open short positions on EUR/USD, you need:
The bears will fight to continue the downward correction, and for this they need to take control of the intermediate support level of 1.2105. A breakthrough and a test of this level from the bottom up creates a signal to sell the euro in order to continue the downward trend to the area of a low like 1.2060, where I recommend taking profits. Updating this area would seriously jeopardize the bullish trend that we saw at the end of last week. Surpassing the 1.2060 range will surely bring the euro down to the 1.2025 area. If we observe an upward correction in the first half of the day, then it is best not to rush to sell: forming a false breakout in the resistance area of 1.2149, along with weak data on sentiment in the eurozone business environment, can create a new signal to sell the euro as we hope for a downward correction... If bears are not active at this level, then I recommend refraining from short positions immediately to a rebound from a large resistance like 1.2177, counting on a downward correction of 15-20 points within the day.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the market after yesterday's downward correction.
Moving averages
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 lower border of the indicator in the area of 1.2120 will increase the pressure on the pair. Growth will be limited in the area of the upper border of the indicator in the area of 1.2175.
Description of indicators
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