Relevance up to 08:00 2022-07-07 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.

When to go long on EUR/USD:

Several market entry signals were formed yesterday. Let's take a look at the 5-minute chart and see what happened. I paid attention to 1.0321 in my morning forecast and advised you to make decisions on entering the market from it. Weekends and holidays are over, and those who were waiting on Monday continued yesterday to get rid of risky assets. The sharp fall of the euro and the breakthrough of the nearest levels did not allow entering the market, since I did not see any reverse tests to confirm the entry point for short positions. Only a breakthrough and reverse test of 1.0321 from below resulted in forming a sell signal, which resulted in another fall of almost 40 points. The bears took control of the immediate support at 1.0282 in the afternoon, which led to another drop of more than 40 points. Closer to the middle of the US session, a false breakout at 1.0240 gave an entry point into long positions. As a result, the pair rose by 20 points, but then the pressure on the euro returned.

COT report:

Before talking about the further prospects for the EUR/USD movement, let's look at what happened in the futures market and how the Commitment of Traders positions have changed. The Commitment of Traders (COT) report for June 28 again recorded a reduction in both long and short positions, but this did not lead to the formation of a larger negative delta, since there were much fewer short positions than long ones. European Central Bank President Christine Lagarde spoke last week, as did Federal Reserve Chairman Jerome Powell. They all spoke of the need to further raise interest rates in order to combat the highest inflation in recent memory. Let me remind you that already this month the European Central Bank intends to start raising interest rates, which should limit the upward potential of the dollar against the euro. The data on inflation in the euro area, released last week, became another proof that it is no longer possible to delay. However, given the current situation in the global economy, there is now more demand for safe haven assets. We are waiting for parity in the EUR/USD pair. The COT report indicated that long non-commercial positions decreased by 6,140 to 189,414, while short non-commercial positions decreased by 11,149 to 200,010. in many developed countries - all this continues to push for long positions on the dollar. At the end of the week, the total non-commercial net position remained negative and amounted to -10,596 against -15,605. The weekly closing price dropped and amounted to 1.0584 against 1.0598.

Today there are a lot of statistics on the eurozone, but I advise you to pay attention to the data on retail sales for May this year, as well as economic forecasts for the EU. Retail sales are projected to rise, and if the final result disappoints traders, the pressure on the pair will only increase. Therefore, bulls need to protect the immediate support of 1.0236. When this level is updated, a divergence may form on the MACD indicator, which will help bulls cope with the tasks set to form a false breakout. Only such a scenario will be the first signal to buy the euro against the bear market observed at the beginning of this week. The nearest target will be the resistance at 1.0285, a little above which there are moving averages, playing on the bears' side. Only a breakthrough and a test down of this range will hit the bears' stops, which will give a signal to enter long positions with the possibility of a larger upward correction to 1.0341, where the sellers will try to build the upper border of the new downward channel. A more distant target will be the area of 1.0384, where I recommend taking profits.

If the EUR/USD declines and there are no bulls at 1.0236, the pressure on the euro will seriously increase again. In this case, I advise you not to rush to enter the market: the best option for opening long positions would be a false breakout in the area of 1.0194. I advise you to buy EUR/USD immediately on a rebound only from the level of 1.0162, or even lower - in the region of 1.0119 with the goal of an upward correction of 30-35 points within the day.

When to go short on EUR/USD:

While the trade will be conducted below 1.0285, everyone will count on a further fall of the euro against the US dollar. As I wrote above, only the emerging divergence on the MACD keeps hope for a rebound of the euro. In the case of EUR/USD growth in the first half of the day after the data on the volume of industrial orders in Germany and positive forecasts for the eurozone economy, only the formation of a false breakout near the nearest resistance of 1.0285 creates a signal to open short positions with the prospect of a return to the support of 1.0236, formed on the basis of yesterday. A lot depends on this level. Breakdown and consolidation below this range, as well as a reverse test from the bottom up - all this will lead to an additional sell signal with the removal of bulls' stops and a larger movement of the pair down to the 1.0194 area. A breakthrough and consolidation below this range is a direct road to 1.0162, where I recommend exiting shorts completely. A more distant target will be the area of 1.0119.

In case EUR/USD moves higher during the European session, and there are no bears at 1.0285, I advise you to postpone short positions to more attractive resistance at 1.0341, where the 50-day moving average passes. Forming a false breakout there will be a new starting point for the continuation of the bear market. You can sell EUR/USD immediately on a rebound from the high of 1.0384, or even higher - in the area of 1.0437 with the goal of a downward correction of 30-35 points.

Indicator signals:

Moving averages

Trading is below 30 and 50 moving averages, which indicates a continuation of the bearish trend.

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

A breakthrough of the lower border of the indicator in the area of 1.0236 will lead to a fall in the euro. Surpassing the upper border of the indicator in the area of 1.0285 will lead to the growth of the euro.

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.

Read more: https://www.instaforex.eu/forex_analysis/315379