03.08.202208:46 Forex Analysis & Reviews: EUR/USD: plan for the European session on August 3. COT reports. The escalation of the US-China conflict puts pressure on the euro

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 the 1.0215 level in my morning forecast and advised making decisions on entering the market from it. The euro failed to catch on to monthly highs, and a breakthrough of the immediate support at 1.0264 occurred without a reverse test, so there was no sell signal. After the update of the 1.0215 level, a false breakout was formed, which led to a good entry point into long positions according to the morning scenario. The pair moved up about 30 points and stalled as the escalation of the US-China conflict continued to gain momentum - especially with the arrival of Pelosi in Taiwan. The bulls tried to defend 1.0215 again in the afternoon and even made a false breakout there, but nothing good came of it and the euro continued to fall. Buying for a rebound from 1.0179 did not work out, as one point was not enough to test the level. Whoever had it - it was possible to earn about 35 more points.

When to go long on EUR/USD:

If we put aside geopolitics, since it is a very bad idea to talk about this - no one knows what it will lead to next and how the parties will behave, I advise you to rely on facts and figures, which are plentiful today. Data on business activity indices in the services sector of the eurozone countries and the eurozone as a whole will be released, as well as reports on the composite PMI index, which includes the manufacturing sector. Contraction across the board is likely to increase pressure on the euro, which will lead to an even greater fall in the pair and a return to the lower border of the horizontal channel. Reports on the change in the volume of retail trade in the eurozone in June and on the eurozone producer price index are unlikely to have a significant impact on the euro, as they are secondary. In case the euro falls after the data, and this is more likely, forming a false breakout in the area of 1.0152, from which the euro has already bounced up today, will give the first signal to open long positions in hopes of building an upward trend with the prospect of updating the resistance of 1.0193. A breakthrough and test of this range would hit bearish stops, providing another signal to enter long positions with the possibility of a larger move up to 1.0233, where the selling moving averages are moving. The farthest target will be the area of 1.0278, where I recommend taking profits.

If the EUR/USD falls and there are no bulls at 1.0152, the pressure on the pair will increase, which will open the way to the lower border of the horizontal channel at 1.0115. The best option for opening longs would be a false breakout at this level. I advise you to buy EUR/USD immediately on a rebound only from 1.0082, or even lower - in the region of 1.0045, counting on an upward correction of 30-35 points within the day.

When to go short on EUR/USD:

Having failed the euro quite a lot, most likely the bears will not give up trying to get close to the lower border of the horizontal channel in the area of 1.0115 today. All that is needed for this is weak statistics on the eurozone and an aggravation of the geopolitical situation between China and the United States. A good option to sell the euro would be a false breakout in the nearest resistance area of 1.0193, which may be formed after the release of bad PMI reports for the euro area. All this will lead to the euro moving down to the area of 1.1052, and a breakthrough and consolidation below this range, as well as a reverse test from the bottom up - creates another sell signal with the removal of bulls' stop orders and a larger movement of the pair to the area of 1.0115. Consolidating below this area is a direct road to 1.0082, where I recommend completely leaving short positions. A more distant target will be the 1.0045 area, but it will be available only in case of very strong US data.

If EUR/USD moves up during the European session, and there are no bears at 1.0193, I advise you to postpone short positions to 1.0233, where the moving averages are. Forming a false breakout there will be a new starting point for entering shorts. You can sell EUR/USD immediately on a rebound from this month's high in the area of 1.0278, or even higher - from 1.0323, counting on a downward correction of 30-35 points.

COT report:

The Commitment of Traders (COT) report for July 26 logged an increase in both short and long positions, but the former turned out to be more, which indicates a gradual end of the bear market and an attempt to find a market bottom after reaching euro parity against the US dollar. Obviously, the data on the European economy that was released last week helped the euro to some extent. A slight acceleration in the growth of the consumer price index was offset by a sharp upsurge in the European economy in the second quarter of this year. GDP growth of 4.0% per annum surprised many economists, which supported the bullish mood of traders after the Federal Reserve hinted at a possible milder further cycle of interest rate hikes. All this will make it possible for us to count on further upward movement of the EUR/USD pair. The COT report shows that long non-commercial positions rose by 2,166 to 198,041, while short non-commercial positions jumped by 1,005 to 239,625. At the end of the week, the overall non-commercial net position, although it remained negative, rose slightly from -42,745 to -41,584. The weekly closing price decreased and amounted to 1.0161 against 1.0278.

Indicator signals:

Moving averages

Trading is below the 30 and 50-day moving averages, which indicates a further downward correction in the pair.

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 1.0152 will act as support. In case of growth, the upper border of the indicator in the area of 1.0230 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.