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To open long positions on EUR/USD, you need:
Despite the rather low volatility of the pair and the trading volume before an important meeting from the European Central Bank, a lot of signals were formed to enter the market. Let's take a look at the 5 minute chart and talk about what happened. Even in the first half of the day after the breakdown of 1.1784, the bears protected this area with all their might, but this did not cause the euro to sharply fall. Move down 12 points and reverse. After regaining control of 1.1784, they sought to protect it, which led to forming a signal to buy the euro, it rose by 15 points and everything stopped again.
In the second half of the day, a signal was finally formed for opening short positions after a breakthrough and reverse test from the bottom up of 1.1773, however, even then the downward movement was no more than 20 points, after which everything was over and the market regained its equilibrium.
Today there are no important fundamental statistics at all, so traders will continue to sit on the fence and reflect on how the European Central Bank will behave tomorrow and what kind of statements ECB President Christine Lagarde will make. This meeting is very important from a perspective on the reassessment of the approach to monetary policy, therefore, we can expect large volatility from the pair tomorrow. Today, the bulls will focus on the level of 1.1779 in the first half of the day, which acts as a kind of middle of the horizontal channel. Only a breakthrough and consolidation on this range, followed by its test from top to bottom, can create a signal for opening long positions in hopes that it would rise to the resistance of 1.1801. The next target of the bulls will be the upper border of the horizontal channel at 1.1825, where I recommend taking profits. In case EUR/USD falls during the European session, and while more selling prevails in the market, the bulls need to try very hard to protect the support at 1.1757. Forming a false breakout there will help ease the pressure on the euro in the short term, which can cause the pair to rise. In case the bulls are not active in the 1.1757 area, I advise you to postpone long positions and wait for the next local low in the 1.1740 area to update from where you can buy EUR/USD immediately on a rebound, counting on an upward correction of 15-20 points within the day. The next big support is seen around 1.1715.
To open short positions on EUR/USD, you need:
Most likely, the bears will continue to put pressure on the euro today. However, this will not be so easy in the absence of important fundamental reports. The whole struggle will unfold around the 1.1779 level. Forming a false breakout on it generates a signal to open short positions in hopes of continuing the bearish trend formed at the beginning of this week. Support at 1.1757 will be an important target, since its breakdown will determine whether the bears are still in control of the pair or not. Updating the lows will keep the downward trend in the pair. Consolidating below this range and testing it from the bottom up (by analogy with the sell, which I analyzed a little above), will form a good signal to open additional short positions in hopes that the pair would fall to the low of 1.1740. The next target will be the area of 1.1715, where I recommend taking profits. In case EUR/USD grows during the European session and the bulls are not active at the level of 1.1779, above which the moving averages pass, it is best to postpone short positions until the test of the larger resistance at 1.1801. Selling the pair immediately on a rebound counting on a downward correction of 15-20 points is also possible from a high of 1.1825.
The Commitment of Traders (COT) report for July 13 clearly showed a skew in the market towards sellers of risky assets. And although the long positions have not changed in any way, the sharp growth in short positions has caused the overall positive net position to fall. The fact that US inflation continues to grow and not only Federal Reserve Chairman Jerome Powell, but also US President Joe Biden, speaks about it, indicates the seriousness of the situation. And no matter how the central bank tries to convince investors that this is just a temporary phenomenon, the market continues to abandon risky assets in favor of safe haven assets, which is the US dollar. This week, the picture can only get worse, as the European Central Bank will hold a meeting on Thursday. At it, politicians will announce a new mandate regarding the long-term rate of inflation in the eurozone, which may lead to a revision of plans for monetary policy in the near future. This will be a certain shock for the euro and it is difficult to guess what the market reaction will be. But the lower the euro falls, the higher the demand for it will be in the medium term, since the appeal of risky assets has not gone away. The COT report indicates that long non-commercial positions remained virtually unchanged and decreased from the level of 212,998 to the level of 212,851, while short non-commercial positions increased from the level of 135,808 to the level of 153,138. In addition to the ECB's decision on Friday, we are waiting for interesting fundamental reports on the activity of the service sector and the manufacturing sector of the eurozone countries, which can definitely affect the euro's direction in the short term. The total non-commercial net position decreased from the level of 77,190 to the level of 59,713. The weekly closing price remained unchanged at 1.1862.
Indicator signals:
Trading is carried out just below 30 and 50 moving averages, which indicates some advantage of the bears over the bulls.
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 upper border of the indicator in the area of 1.1790 will lead to a new wave of euro growth. A breakthrough of the lower border of the indicator in the area of 1.1765 will increase the pressure on the pair.
Description of indicators
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