16.12.202008:31 Forex Analysis & Reviews: EUR/USD: plan for the European session on December 16. COT reports. Euro buyers ready to surpass 1.2164, awaits Fed's decision

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

The pair spent the whole day in a horizontal channel yesterday, as well as the day before, and volatility remained at a fairly low level, as everyone is focused on today's Federal Reserve meeting, which will become the key one at the end of this year. In my afternoon forecast, I paid attention to selling only if a false breakout forms from the 1.2164 level, which happened. Let's take a look at a 5-minute chart. You can see how buyers' failure to surpass resistance of 1.2164 led to forming a false breakout in this range, and a reverse test of this level from the bottom up in the afternoon confirmed the presence of sellers in the market, which caused EUR/USD to fall by more than 40 points, similar to yesterday. Technically, nothing has changed as traders ignored the strong industrial output in the United States.

Like yesterday, buyers of the euro will try to do their best to control resistance at 1.2164. Only this will lead to another upward wave for the euro and can sustain the bull market. A breakout and getting the pair to settle above 1.2164 while testing it from top to bottom produces a good signal to buy EUR/USD in hopes for it to reach a high of 1.2211, where I recommend taking profits. The next target will be a high of 1.2255, which buyers will be aiming for this week. In the first half of the day, the focus will shift to the report on activity in the service sector of the eurozone, as well as on activity in the manufacturing sector, which is now pulling the entire economy. Strong performance will lead to a stronger euro. Surpassing 1.2255 will open a direct road to new annual highs at 1.2339 and 1.2417. In case the euro falls in the first half of the day and buyers are unable to surpass 1.2164, it is best not to rush with long positions, but to wait until a false breakout forms in the support area of 1.2110. I recommend buying EUR/USD immediately on a rebound from a low of 1.2060, counting on a correction by 20-25 points within the day.

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

Sellers will actively defend resistance at 1.2164, slightly above which the annual highs pass. Forming a false breakout there, similar to yesterday's sell trade, which I sorted out a little higher, will lead to forming a new downward correction, which will be aimed at surpassing the 1.2110 low. However, only the Fed's decision to leave monetary policy unchanged and the fact that the pair will fall even lower than this range can renew pressure on the euro, which will open a direct road to the 1.2060 area, where I recommend taking profit. The next target will be the 1.1986 area, a test of which will mean a reversal of the current upward trend. If the bulls find strength after receiving the report on the activity of the service sector and the manufacturing sector of the eurozone and they manage to surpass resistance of 1.2164, I recommend not to rush to sell. The optimal scenario would be a test of the 1.2211 high and a false breakout. I recommend opening short positions immediately on a rebound from the 1.2255 level, counting on the pair's correction down by 15-20 points.

The Commitment of Traders (COT) report for December 8 recorded an increase in long positions and a reduction in short positions. Buyers of risky assets believe in sustaining the bull market and the euro's growth after surpassing the psychological mark in the area of the 20th figure. Thus, long non-commercial positions rose from 207,302 to 222,521, while short non-commercial positions fell from 67,407 to 66,092. The total non-commercial net position rose from 139,894 to 156,429 a week earlier. It is worth paying attention to the growth of the delta, observed for the third consecutive week, which completely negates the bearish trend observed at the beginning of this fall. We can only speak of a larger recovery after European leaders negotiate a new trade agreement with Britain.

Indicator signals:

Moving averages

Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the 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

Low market volatility does not provide signals for this indicator.

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.