Forex: EUR/USD - Commitment Of Traders Shows Number Of Short Positions Increased!
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Several interesting market entry signals were formed yesterday. Let's take a look at the 5-minute chart and see what happened. I paid attention to the 0.9941 level in my morning forecast and advised you to make decisions on entering the market from it. A false breakout near 0.9941 made it possible for bulls to respond to what they thought was a downside correction. As a result, a buy signal was formed, but I did not see a major upswing. The most that could be expected was 20 points of profit. The bears achieved a breakdown of 0.9941 in the afternoon, and a reverse test from the bottom up led to a sell signal, which resulted in a fall of 30 points. The euro's sharp rise after the release of US data did not make it possible for us to see new entry points to the market.
When to go long on EUR/USD:
Yesterday was similar to the day before, where another portion of weak data on the US led to a sharp decline in the US dollar against the euro. Today should be quite an interesting day, as a variety of eurozone statistics are expected to be released, as well as the start of a two-day symposium at Jackson Hole, which promises a major spike in volatility. The market direction during the European session will be set by data on German GDP, as well as on the index of business expectations, the current situation and the business climate in Germany from the IFO Institute. The decline in indicators will have a negative impact on the euro, which may lead to a fall in the area of the nearest support level of 0.9969. Forming a false breakout there will provide a new signal to open long positions in hopes that EUR/USD would recover further with the prospect of updating resistance at 1.0027. A breakthrough and test of this range from top to bottom will occur only after the release of the minutes of the European Central Bank meeting, in which traders will look for hints of more aggressive actions of the central bank in the future. All this will hit the bears' stop orders, creating another signal to enter long positions with the possibility of updating 1.0068, while the resistance at 1.0097 will be a more distant target, where I recommend taking profits.
In case EUR/USD falls and the bulls are not active at 0.9969, the pressure on the pair will increase again. In this case, the best option for opening longs would be a false breakout in the intermediate support area of 0.9942. I advise you to buy EUR/USD immediately on a rebound only from 0.9911, or even lower - around the parity of 0.9861, counting on an upward correction of 30-35 points within the day.
When to go short on EUR/USD:
The bears' main task is to protect the very important resistance at 1.0027. Taking into account that after another major upsurge in the face of disappointing US data, there were still those willing to buy the euro, we can expect further upward movement from the pair. Therefore, the optimal scenario for opening short positions would be a false breakout at 1.0027 in the morning, which will lead to the euro sliding down to the 0.9969 area, where the moving averages play on the side of the bulls. A breakdown and consolidation below this range with a reverse test from the bottom up creates another sell signal with the removal of bulls' stop orders and a larger drop in the pair to the 0.9942 area, and there it is within easy reach to 0.9911, where I recommend taking profits. A more distant target will be the area of 0.9861.
If EUR/USD jumps during the European session if we receive good statistics from IFO on Germany, as well as the absence of bears at 1.0027, there will be an opportunity to implement an option with further profit taking on short positions before an important meeting in Jackson Hole, which will change the situation in favor of the bulls. In this case, I advise you to postpone short positions until 1.0068, but only if a false breakout is formed there. You can sell EUR/USD immediately on a rebound from the high of 1.0097, or even higher - from 1.0127 counting on a downward correction of 30-35 points.
COT report:
The Commitment of Traders (COT) report for August 16 logged a sharp growth in short positions and a decline in long positions, which confirms the euro's current position against the US dollar. The risk of a looming recession in the US is now combined with the risk of more serious problems in the eurozone, which will begin this autumn amid a sharp rise in energy prices and further inflation, which the European Central Bank is fighting at a fairly moderate pace so far. At the end of this month, American politicians will have a meeting at Jackson Hole, where the key word will be Federal Reserve Chairman Jerome Powell. The pair's succeeding direction will depend on this, as a strong dollar harms the American economy and further accelerates inflation, which the central bank is fighting against. The COT report indicated that long non-commercial positions decreased by 862 to 199,226, while short non-commercial positions jumped by 7,386 to 242,010. At the end of the week, the total non-commercial net position remained negative and fell to -42,784 against -34 536, which indicates that the euro could be under pressure again and may also fall further. The weekly closing price decreased and amounted to 1.0191 against 1.0233.
Indicator signals:
Moving averages
Trading is above the 30 and 50-day moving averages, indicating that the bulls are trying to maintain the correction.
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
In case of a decline, the lower border of the indicator around 0.9911 will act as support. In case of growth, the upper border of the indicator in the area of 1.0010 will act as resistance.
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.
Relevance up to 08:00 2022-08-26 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
