06.07.202213:14 Forex Analysis & Reviews: EUR/USD trading plan on July 6, 2022. COT report and analysis of morning trades. EUR extends losses after downbeat retail sales data

In my morning review, I pointed out the level of 1.0236 and recommend it as a good entry point. Let's have a look at the 5-minute chart and see what happened there. The weak data on retail sales and the reluctance of traders to buy the euro even near yearly lows accelerated the decline of the pair. Unfortunately, the pair did not retest the level of 1.0236 after its breakout. That is why I missed a good moment to go short and stayed out of the market. In the afternoon, the technical setup has slightly changed.

For long positions on EUR/USD:

During the New York session, we expect a bunch of important statistics from the US. No matter how weak it can be, the chances of the euro are very slim. The Composite PMI and the Services PMI will set the stage for the market in the second half of the day. Yet, the most attention will be given to the FOMC minutes for June which will also be accompanied by John William's speech. Although the reaction to the minutes is pretty clear since everybody knows where the Fed is headed, the market may still see some waves of volatility. In the case of a further decline in EUR, its nearest support will be found at 1.0194. A false breakout of this level will generate a good signal for opening long positions considering a short-term upside correction towards 1.0247. At this point, large market players may step in to follow the bearish trend. A breakout and a retest of this level from top to bottom will create a nice entry point to buy the pair and may trigger stop-loss orders set by the bears. This will allow the pair to move to the nearest key resistance level of 1.0292 where the moving averages supporting the bear market are located. The next upside target will be the level of 1.0341 although there are currently no conditions for such a strong rise. If the euro dollar/pair continues to decline and the buyers' activity is low at 1.0194, the situation will become even worse. If so, I would advise you to stay out of the market. The best scenario will be to open long positions after a false breakout of the support area of 1.0162. It is possible to buy EUR/USD right on a rebound from the level of 1.0119, or even lower at 1.0072, keeping in mind an upside correction of 30-35 pips within the day.

For short positions on EUR/USD:

Bears are still in control of the market. They made a successful attempt to break through yearly lows. If the euro advances later in the day amid weaker than expected US data, this movement might be just a technical correction. A false breakout of 1.0247 will generate a good signal to open short positions with the next downward target at the nearest support of 1.0194. A breakout and consolidation below this range during the minutes release and a retest from the bottom up just as I described above will be another sell signal and will be a trigger for stop orders set by the buyers. In this case, the price may reach a fresh yearly low at 1.0162. It is unlikely that this level will be important for the market. So, after a short upside rebound, the quote may break through this area and reach the level of 1.0119. This is where I recommend taking profit. The level of 1.0072 will serve as a more distant target. At this level, the pair is getting closer to the parity status between the euro and the dollar. If EUR/USD advances in the course of the American session and bears give up at the level of 1.0247, this will not change the situation drastically. At the same time, I would recommend going short only when the price tests the level of 1.0292. Above this mark, we can see the moving averages that support the bearish trend. The formation of a new breakout at this level will be another good point for bears to develop the downtrend. It is possible to sell EUR/USD right after a rebound from the high of 1.0341, or even higher at 1.0384, keeping in mind a downward correction of 30-35 pips.

COT report

The COT report for June 28 recorded a reduction in both long and short positions although this did not lead to the formation of a large negative delta. In fact, short positions exceeded the number of long ones. Last week, ECB President Christine Lagarde and Fed Chair Jerome Powell made statements. They were both discussing the necessity to raise interest rates in order to tackle record-high inflation. For your reference, the European regulator will start raising the rates this month. This may potentially limit the upside prospects for the US dollar. The recent inflation data in the eurozone proved once again that there is no more time to hesitate. However, given the current global economic situation, the demand for safe-haven assets is still strong. It may well be that the euro/dollar pair reaches the parity level. According to the COT report, long positions of the non-commercial group of trades decreased by 6,140 to 189,414, while short ones fell by 11,149 to 200,010. Despite the euro trading at attractive prices, the policy of rate hikes and the threat of a recession stimulate traders to buy the US dollar. By the end of the week, the total non-commercial net position remained in the negative zone and stood at -10,596 versus -15,605. The weekly closing price dropped to 1.0584 from 1.0598.

Indicator signals:

Moving Averages

Trading below the 30 and 50-day moving averages indicates a further fall in the euro.

Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.

Bollinger Bands

In case of an uptrend, the upper band of the indicator at 1.0240 will serve as resistance.

Description of indicators:

• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;• Bollinger Bands: 20-day period;• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;• The total non-commercial net position is the difference between short and long positions of non-commercial traders.