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In my morning forecast, I highlighted the 1.0792 level and planned my trading decisions around it. Let's examine the 5-minute chart to review the events. The pair rose to this level and experienced a false breakout, providing an entry point for short positions. This led to a minor 15-point decline before the pressure eased. The technical outlook for the second half of the day remains unchanged.
To Open Long Positions on EUR/USD:
Given the lack of significant Eurozone data in the first half of the day, it's unsurprising that the euro failed to break above 1.0792. Attention now turns to November's inflation expectations, the University of Michigan Consumer Sentiment Index, and a speech by FOMC member Michelle Bowman. Strong U.S. data could renew pressure on the euro, pushing the pair toward the 1.0754 support level, which remained untouched during the morning session.
A false breakout at 1.0754 could provide a favorable condition for building long positions, leading to a correction toward 1.0792. A breakout and retest of this level would confirm a proper buying entry point, targeting 1.0822. The final target is 1.0855, where I plan to take profits.
If EUR/USD declines and no significant activity occurs near 1.0754 in the second half of the day, the euro risks returning to the broader downward trend. In this case, I will consider long positions only after a false breakout around the next support at 1.0715. Additionally, I plan to open long positions on a rebound from 1.0685, aiming for a 30-35 point upward correction within the day.
To Open Short Positions on EUR/USD:
Sellers will aim to defend resistance at 1.0792. A false breakout at this level, as described earlier, could provide an entry point for short positions, targeting a decline toward the 1.0754 support level, where the moving averages are located.
A breakout and consolidation below this range, followed by a retest from below, would confirm a selling signal, with the pair targeting the weekly low at 1.0715 and establishing a new bearish trend. The final target is 1.0685, where I plan to take profits.
If EUR/USD rises in the second half of the day and sellers fail to defend 1.0792, buyers may gain an opportunity to build a larger correction. In this case, I will postpone selling until the pair tests the next resistance at 1.0822. I will also sell at that level, but only after a failed consolidation. Lastly, I plan to open short positions on a rebound from 1.0855, aiming for a 30-35 point downward correction.
COT Report Analysis:
The Commitment of Traders (COT) report for October 29 indicated a notable increase in short positions and a modest rise in long positions. It's worth noting that the data does not account for the latest U.S. labor market figures or the market's reaction to recent public opinion polls regarding the U.S. presidential election.
This week's Fed meeting, with its anticipated rate cut, makes the report less relevant. According to the COT report, non-commercial long positions increased by 6,154 to 159,313, while non-commercial short positions grew by 27,934 to 209,617. As a result, the net non-commercial position widened by 543 contracts.
Indicator Signals:
Moving Averages: Trading is currently occurring around the 30- and 50-day moving averages, suggesting market indecision.
Note: The author analyzes moving averages on the H1 hourly chart, which differs from the standard definition of daily moving averages on the D1 chart.
Bollinger Bands: In case of a decline, the lower boundary of the indicator near 1.0760 will act as support.
Indicator Descriptions:
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