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22.09.202208:44 Forex Analysis & Reviews: EUR/USD: plan for the European session on September 22. COT reports. The Fed raises interest rates and tightens the rules of the game

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Several fairly good 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 levels 0.9947 and 0.9902 in my morning forecast and advised making decisions on entering the market. A breakthrough and reverse test from below 0.9947 resulted in an excellent sell signal for the euro, which resulted in a drop of more than 40 points to the 0.9902 area. Euro bulls began to act more aggressively in that area, and speculative bears rushed to take profits ahead of an important Federal Reserve meeting, which led to a false breakout and a signal to buy the euro with a bounce up more than 30 points. Everyone was waiting for the Fed's meeting in the afternoon, at which there was a sharp fall in the euro at first, which led to a false breakout in the 0.9819 area and a buy signal. As a result, the upward movement amounted to about 70 points. The bears quickly became active during Powell's speech, and protecting the 0.9907 resistance provided a great sell signal, resulting in a 50 point decline.

Exchange Rates 22.09.2022 analysis

When to go long on EUR/USD:

Fed Chairman Jerome Powell vowed yesterday that he would crush inflation by any means necessary after the Open Market Committee raised interest rates by another 75 basis points for the third consecutive time and signaled an even more aggressive policy than investors had expected. All this led to a surge in volatility and ultimately put serious pressure on the euro, which collapsed to another annual low in the 0.9813 area. Protecting this range will be the top priority for now, but it will be quite difficult to do this, as it is unlikely that the data on the eurozone consumer confidence indicator and the economic bulletin from the European Central Bank will be able to oppose the current policy of the Fed. Forming a false breakout at 0.9813 will provide an entry point to the market with the goal of an upward correction to the area of 0.9861 – the level formed on the basis of yesterday. It is possible that hawkish statements from ECB Executive Board member Isabelle Schnabel may help the euro in the morning, but only a breakthrough and test from top to bottom of 0.9861 will hit the bears' stops, which will create another signal to open long positions with the possibility of a dash up into the 0.9907 area, where the moving averages are, playing on the bears' side. A more distant target will be resistance at 0.9952, where I recommend taking profits.

In case EUR/USD falls further, which is more likely, and the bulls are not active at 0.9813, the pressure on the pair will increase, which will lead to a continuation of the bearish trend. The optimal decision to open long positions in such conditions would be a false breakout near the low of 0.9770. I advise you to buy EUR/USD immediately on a rebound only from 0.9723, or even lower - in the area of 0.9684, counting on an upward correction of 30-35 points within the day.

When to go short on EUR/USD:

The bears are in control of the market after yesterday's meeting and will continue to pull down the euro, as there are no real reasons to buy risky assets yet. The risk of a further energy crisis in Europe and an increase in interest rates by the ECB - all this will continue to negatively affect the economy, pushing the euro to the downside. The best option for selling in the current conditions would be the pair's growth in the first half of the day and forming a false breakout in the area of 0.9861, which will lead the euro to re-update the annual low of 0.9813. 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 fall of the pair to the 0.9770 area. A more distant target will be the area of 0.9723, where I recommend taking profits.

If EUR/USD jumps during the European session, as well as the absence of bears at 0.9861, the demand for the euro will return, but nothing terrible will happen to the bears. An upward correction will lead to the next resistance at 0.9907. In this scenario, I recommend opening short positions only if a false breakout is formed. You can sell EUR/USD immediately on a rebound from a high like 0.9952, or even higher - from 0.9996, counting on a downward correction of 30-35 points.

Exchange Rates 22.09.2022 analysis

COT report:

The Commitment of Traders (COT report) for September 13 logged a decline in short positions and a slight increase in long positions. This suggests that the European Central Bank meeting and a sharp increase in interest rates immediately by 0.75% influenced traders who preferred to take profits at current levels even despite the approaching Federal Reserve meeting. This week, the Open Market Committee is likely to raise rates by at least 0.75%, but there are rumors in the market that some politicians are in favor of raising the rate by 100 basis points, or 1.0%. This will lead to increased bearish momentum and the euro's new collapse against the US dollar. Considering the US inflation data for August of this year, the development of such a scenario cannot be ruled out. However, it should be understood that the European Central Bank is also no longer "sitting on the sidelines" and is starting to catch up with the Federal Reserve, reducing the gap between returns. This plays on the side of long-term bulls of the euro, who are counting on a recovery in demand for risky assets. The COT report indicated that long non-commercial positions rose by 2,501 to 207,778, while short non-commercial positions decreased by 22,011 to 219,615. At the end of the week, the overall non-commercial net position remained negative, but rose slightly to -11,832 from -36,349, which indicates the continuation of the alignment of the upward correction for the pair and groping the bottom. The weekly closing price increased and amounted to 0.9980 against 0.9917.

Exchange Rates 22.09.2022 analysis

Indicator signals:

Moving averages

Trading is below the 30 and 50-day moving averages, indicating an attempt by the bears to regain control of the market.

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 growth, the upper border of the indicator in the area of 0.9950 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.
Miroslaw Bawulski
Analytical expert of InstaForex
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