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To open long positions on EURUSD, you need:
In my morning forecast, I paid attention to several levels from which it was necessary to make decisions on entering the market. Let's look at the 5-minute chart and figure out what happened. In the absence of important fundamental statistics for the eurozone, euro buyers took advantage of the moment of formation of a false breakdown in the area of 1.1265, which led to the formation of an entry point into the market and then to an increase in the resistance area of 1.1291. The breakthrough of this level occurred without a reverse test from top to bottom, so it was not possible to add to long positions. At the time of writing, the pair has reached the upper limit of the 1.1318 side channel, for which an active struggle is now underway. And what about the morning signals for the pound?
Despite the risks of a more active tightening of monetary policy by the Federal Reserve System, the European currency managed to regain its position against the US dollar and return to the rather important resistance of 1.1318. Only a rush and consolidation above this range, together with weak data on producer prices in the US, will increase the appetite for risks, which will form an excellent entry point for buying EUR/USD to update the next resistance of 1.1353. Going beyond this range can seriously affect the EUR/USD downward trend, so be very careful at this level. A breakout and a top-down test of 1.1353 will lead to a larger increase in the area of the highs of 1.1381 and 1.1415. However, it would not be quite right to count on such an upward movement of the pair before an uncertain meeting of the European Central Bank. In the event of a decline in EUR/USD in the afternoon, bulls need to try to protect the support of 1.1291, which acted as resistance in the morning. There are moving averages that are already playing on the buyers' side. Only the formation of a false breakout at 1.1291 will lead to the formation of a good entry point into long positions. If by the time the American trading starts, the bulls will not be able to offer anything around 1.1291, it is better not to rush with long positions. I advise buying EUR/USD immediately for a rebound from the lower border of the side channel 1.1265, or even lower - around 1.1238 with the aim of an upward correction of 20-25 points within a day.
To open short positions on EURUSD, you need:
Sellers again decided not to escalate and after an unsuccessful attempt to break 1.1265 in the first half of the day, they did not even think about protecting the middle of the 1.1291 side channel, leaving everything to traders waiting for 1.1318. The bears have already defended this level for the first time, and in case of an unsuccessful attempt to grow the pair above this range in the afternoon, along with the formation of a false breakdown, you can count on short positions with the prospect of the euro returning to the support area of 1.1291. A breakdown and a reverse test from the bottom up of this range form an additional signal to enter the market, which will push the pair to a minimum of 1.1265, where today it was possible to observe the active actions of buyers. Quite a lot depends on this level, since going beyond it will dump the euro by 1.1238 – the lower limit of the wider side channel from November 30. A breakthrough of 1.1238 will open a direct road to the lows of 1.1214 and 1.1188. In the case of recovery of the pair in the second half and the absence of bear activity at 1.1318, the optimal scenario will be sales when a false breakdown is formed in the area of 1.1353. It is possible to sell EUR/USD immediately on a rebound from the highs of 1.1381 and 1.1415 with the aim of a downward correction of 15-20 points.
The COT report (Commitment of Traders) for December 7 recorded a decrease in short positions and a slight increase in long ones, which led to a decrease in the negative value of the delta. Many traders were preparing for the meetings of central banks that will be held this week. Very serious changes are expected in the monetary policy of the Federal Reserve System, as well as the European Central Bank. The inflation data force the management to act more aggressively, however, which way it will choose is a rather difficult question. Last week there were several speeches by the Chairman of the Federal Reserve System Jerome Powell, who in his comments spoke enough about the expected changes in monetary policy towards its tightening. The Omicron coronavirus strain also prevents Europeans and Americans from sleeping peacefully, which constrains demand for risky assets in the face of uncertainty about the future policy of the European Central Bank. The latest November COT report indicated that long non-commercial positions rose from the level of 191,048 to the level of 194,869, while short non-commercial positions fell from the level of 214,288 to the level of 203,168. This suggests that traders preferred to fix part of the profit before important events in the conditions of the formed side channel. At the end of the week, the total non-commercial net position decreased its negative value from -23,240 to -8,299. The weekly closing price due to the side channel, on the contrary, has not changed – 1.1283 against 1.1292.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily moving averages, which indicates an attempt by bulls to return to the market.
Note. The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
A breakthrough of the lower limit of the indicator in the area of 1.1265 will increase the pressure on the pound. In case of growth, the upper limit of the indicator around 1.1318 will act as resistance.
Description of indicators
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