05.05.202114:53 Forex Analysis & Reviews: EUR/USD: plan for the US session on May 5 (analysis of morning trades)

To open long positions on EURUSD, you need to:

The sellers of the euro broke below the support of 1.2000, after which a good entry point into short positions was formed. Let's look at the 5-minute chart and talk about what happened: it is clear that a sharp breakout of 1.2000 and a reverse test of this level from the bottom up formed a good entry point into short positions, after which the pair passed about 15 points, and the movement ended. After some time, the bulls regained the level of 1.2000. However, it was not possible to wait for a convenient entry point to long positions from it.

Against this background, we had to re-evaluate the nearest support and resistance levels and change the trading strategy. In the second half of the day, the bulls will focus on breaking the new resistance of 1.2025, which coincides with today's highs. Only a real break and consolidation above 1.2025 with a reverse test from top to bottom will lead to the formation of a signal to open long positions in the expectation of the euro's recovery in the resistance area of 1.2059, where I recommend taking the profits. If the pressure on the pair returns in the second half of the day after a series of fundamental statistics on the US economy, I recommend looking at purchases only if a false breakout is formed in the area of 1.1988. You can open long positions immediately for a rebound only at the new local low of 1.1958, counting on an upward correction of 15-20 points within the day.

To open short positions on EURUSD, you need to:

The bears coped with the first task – they continued the downward trend of the euro. Weak data on activity in the eurozone services sector did its job. At this point, I paid close attention to my morning forecast. The main task of sellers for the second half of the day is to protect the resistance of 1.2025, to which the bulls came close after an unsuccessful consolidation in the area of new weekly lows. Only the formation of a false breakout in the area of 1.2025 will allow sellers to increase pressure on the euro, and good data on the US economy will dump EUR/USD by 1.1988. A break and consolidation below this level with a reverse test of it from the bottom up by analogy with the sale, which I analyzed a little higher – all this will lead to another entry point into short positions already in the expectation of updating the minimum of 1.1958, where I recommend fixing the profits. If the bears do not show activity in the area of 1.2025, and the bulls will be able to take this range in the second half of the day – it is best to abandon sales before the EUR/USD reaches a new local maximum in the area of 1.2059. You can immediately sell the euro from this level on a rebound with the expectation of a downward correction of 20-25 points within the day.

Let me remind you that the COT report (Commitment of Traders) for April 27 showed an increase in both short and long positions, but the latter turned out to be more, which led to an increase in the overall non-commercial position. It suggests that active purchases of the euro by the players continue, and you can bet on further strengthening of the pair after a downward correction. The Federal Reserve's decisions on interest rates and monetary policy did not significantly affect the US dollar, as did the next programs proposed by US President Joe Biden to stimulate economic growth in the near future through changes in the tax system. Given that the Fed will continue to stick to the same course even despite the sharp economic jump, the demand for risky assets will most likely continue after the decline of the EUR/USD pair earlier this month. The COT report shows that long non-profit positions jumped sharply from 197,137 to the level of 200,415.

In contrast, short non-profit positions rose from 116,329 to the level of 119,448, indicating an influx of new buyers in the expectation of continued growth of the euro. The more the euro is adjusted downwards at the beginning of this month, the stronger the demand will be. As a result, the total non-commercial net position rose sharply from the level of 80,808 to the level of 80,967. The weekly closing price continued its growth to 1.20795 from the level of 1.2042 a week earlier.

Signals of indicators:

Moving averages

Trading is conducted below 30 and 50 daily moving averages, which indicates a continued decline in the euro.

Note: The period and prices of the moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.

Bollinger Bands

In the case of an upward correction of the pair in the second half of the day, the upper limit of the indicator in the area of 1.2030 will act as a resistance.

Description of indicators

• Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
• Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
• MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands (Bollinger Bands). Period 20
• Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet specific 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 the short and long positions of non-commercial traders.