27.05.202108:41 Forex Analysis & Reviews: EUR/USD: plan for the European session on May 27. COT reports. Euro sharply fell against the US dollar, but it is too early to panic

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

After another unsuccessful attempt to rise above the local high in the first half of the day, the pressure returned for the pair. This caused EUR/USD to fall and also led to a breakthrough of a rather important support, which trampled all the bulls' enthusiasm to buy the euro again at the current highs. There was only one signal to enter the market yesterday afternoon, but it also did not bring the expected profit, as the bears continued to pull down the market. If you look at the 5-minute chart, you will see how the bulls are protecting resistance at 1.2228, forming a false breakout there and creating a signal to open long positions from there. However, after a while, the bears regained control of the market, which brings losses on the trade.

We can hardly count on the euro to strengthen today, especially before the publication of data on changes in the volume of US GDP for the first quarter of this year. A revision of the indicator for the better is expected, which will further spur talk about the forthcoming changes in the Federal Reserve's bond purchasing program - this is a direct signal for the dollar to strengthen. Euro bulls will most likely aim to return to the resistance of 1.2219 during the European session. Only a breakthrough and test of this area from top to bottom can create a new entry point into long positions in continuation of the upward trend and only then can we count on the renewal of the monthly high in the 1.2261 area, where I recommend taking profits. The next target will be the area of 1.2313, but getting to this level will not be so easy, especially since the eurozone will not release any important reports today, instead, only speeches by representatives of the European Central Bank will take place. A more optimal scenario for buying will be a downward correction to the support area of 1.2179. Forming the next false breakout there will be a good entry point into long positions in hopes of stopping the intraday bearish trend so that the pair can recover to the resistance area of 1.2219, where the moving averages pass, limiting the upward potential. The 1.2179 level also acts as a kind of lower border of the horizontal channel, in which the pair is now locked. The upper border of the channel coincides with the high of 1.2261. In case the bulls are not active in the support area of 1.2179, it is best to postpone short positions until a new large low in the area of 1.2126 is renewed, counting on an upward correction of 15-20 points within the day.

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

The bears will struggle to continue the pair's downward trend. To do this, they need to fall below the level of 1.2179. Most likely, a repeat test of this area, which may take place in the near future, will push the pair to go beyond the range, and a reverse test from the bottom up will create a good signal for you to open new short positions in continuation of the downward trend that was observed yesterday. The immediate target will be the area of 1.2126, where I recommend taking profit. Support for 1.2075 is still the long-term goal. In case EUR/USD grows after the speeches of the ECB representatives and the German report is released in the first half of the day, forming a false breakout in the area of 1.2219 will create a new signal for you to sell the euro in hopes that the pair would fall to 1.2179 and go beyond it. There are moving averages that play on the sellers' side in the area of 1.2219. If the bears are not active in the 1.2219 area in the first half of the day, I recommend refraining from short positions until the resistance at 1.2261 has been updated, where you can open short positions immediately for a rebound, counting on a downward correction of 15-20 points within the day. The next major resistance passes only at a new local high in the area of 1.2313.

The Commitment of Traders (COT) report for May 18 revealed that both short and long positions increased, but this time there were more bulls, which caused overall non-commercial positions to rise. Last week, everyone was waiting for economic indicators for the eurozone, namely data on inflation and GDP growth rates. The reports were in line with economists' forecasts, which made it possible for the euro to at least maintain the pair's upward potential. The release of the minutes of the Federal Reserve meeting pushed risky assets to fall, as there were ghostly hints among the committee members about the curtailment of the bond purchase program. However, the next day the entire fall was won back. By the end of the week, the pressure on the euro returned after European Central Bank President Christine Lagarde said that it was not time to roll back stimulus support in the eurozone. The data released over the past week did not worry traders much, since all the attention is now focused on the monetary policy of central banks. Apparently, only the news that the Fed is seriously going to reduce the volume of purchases of bonds can lead to a serious growth of the US dollar. Until then, with each decline from the pair, the demand for risky assets will return, which will help the euro in the short term and further renew its monthly highs. The COT report indicated that long non-commercial positions jumped from 223,387 to 232,330, while short non-commercial positions rose from 129,480 to 132,472. This indicates an influx of new buyers in hopes that the euro will continue to rise, however with each renewal of the high, there are more and more people willing to sell. The total non-commercial net position rose from 93,907 to 99,858. The weekly close also increased from 1.21406 to 1.21564.

Indicator signals:

Trading is under the 30 and 50 moving averages, which indicates an attempt by the bears to build a new downward wave.

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 1.2170 will increase the pressure on the pair. The growth of the euro will be limited in the area of the upper border of the channel area of 1.2240.

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.