Relevance up to 08:00 2022-06-10 UTC–4
In the morning article, I highlighted the level of 1.0707 and recommended taking decisions with this level in focus. Now let’s look at the 5-minute chart and try to figure out what actually happened. In the first half of the day, bears pushed the price to 1.0707. However, I did not see good entry points as the downward movement was limited. After the ECB’s decision to conclude the bond purchase program, there was a new downward movement to 1.0707 and a false breakout. A bug signal appeared. The price jumped to 1.0750. The technical outlook has not changed as well as the strategy.
What is needed to open long positions on EUR/USD
At the time of writing the article, a breakout of the 1.0750 level occurred. If the price consolidates at this level, an uptrend is likely to continue. Following the results of the meeting, the ECB committed to raising interest rates by a quarter-point next month. It also hinted at another rate increase in the autumn to combat soaring inflation. New reports also confirm that inflation in the eurozone is growing faster than previously expected. From July 1, the ECB will cease its large-scale asset purchases. A new buy signal will appear after a downward test of the 1.0750 level. The bulls will gain the upper hand. Therefore, the price may grow to the monthly high of 1.0785 where I recommend locking in profits. The pair could advance to 1.0820 only after Christine Lagarde’s speech at the press conference. She may reveal more details of the ECB’s plan to combat inflation. If EUR /USD drops sharply to the support area of 1.0707, I advise you to buy only after a false breakout, similar to the one I mentioned above. If bulls show no activity at 1.0707, the pressure on the euro will significantly increase. Bulls will rush to close their stop-loss orders below this level, pushing the pair to 1.0666. It is recommended to open long positions after a false breakout. You can buy EUR/USD immediately at a bounce from the level of 1.0630 or even a low of 1.0596, keeping in mind an upward intraday correction of 30-35 pips.
What is needed to open short positions on EUR/USD
Sellers tried hard to regain ground in the first half of the day but it was obvious that the trend had already changed. If EUR/USD rises higher in the afternoon, only a false breakout of 1.0785 will give a sell signal with the prospect of a drop to 1.0750. Trading is carried out above the moving averages. So, the bulls will do everything to cement the upward movement. Only Christine Lagarde’s statements, which clearly will not have a dovish tone, may negatively affect the euro. A decline below 1.0750, as well as an upward test of this level, will provide an additional selling opportunity. In this case, EUR bulls will have to close stop-loss orders, pushing the pair down to 1.0707. A breakout below 1.0707 may also occur. If so, the pair will resume the downward movement. The more distant target will be the 1.0666 level where I recommend closing all short positions. If EUR/USD rises during the US session and bears show no energy at 1.0785, which is more likely, the upward movement is likely to persist. It is better to open short positions after a false breakout of 1.0820. You can sell EUR/USD immediately at a bounce from the monthly high of 1.0853 or even a high of 1.0894, keeping in mind a downward intraday correction of 30-35 pips.
The COT report for May 24 logged a rise in the number of long positions and a decline in the number of short positions. Traders continued opening long positions, expecting a more aggressive monetary policy from the ECB. Although last week, there were fewer comments about a key interest rate hike in the near future, the euro/dollar pair managed to retain its upward potential. Now, analysts suppose that the ECB will raise the deposit rate by one-fourth of a basis point as early as July. The next two hikes will take place in September and December. By the end of the year, the benchmark rate is expected to be at the level of 0.25%. However, some experts are sure that the central bank will have to take more aggressive measures. A lot depends on the inflation report for May of this year. The indicator may jump to 7.7% on a yearly basis, thus increasing pressure on politicians. Against the backdrop, the regulator may raise the key interest rate up to 0.5% from the current zero level. The COT report unveiled that the number of long non-commercial positions increased by 6,302 to 237,072 from 230,770, while the number of short non-commercial positions declined by 12,289 to 198,142 from 210,431. The euro’s low price is making the currency more attractive for mid-term traders. According to the weekly results, the total non-commercial net position increased to 38,930 from 20,339. The weekly close price jumped to 1.0734 from 1.0556.
Signals of technical indicators
EUR/USD is trading above 30- and 50-period moving averages, signaling strong upward movement.
Remark. The author is analyzing the period and prices of moving averages on the 1-hour chart. So, it differs from the common definition of classic daily moving averages on the daily chart.
In case of a decline, the lower border of 1.0710 will act as support.
Definitions of technical indicators
Moving average recognizes an ongoing trend through leveling out volatility and market noise. A 50-period moving average is plotted yellow on the chart.Moving average identifies an ongoing trend through leveling out volatility and market noise. A 30-period moving average is displayed as the green line.MACD indicator represents a relationship between two moving averages that is a ratio of Moving Average Convergence/Divergence. TheMACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. A 9-day EMA of the MACD called the “signalline”.Bollinger Bands is a momentum indicator. The upper and lower bands are typically 2 standard deviations +/- from a 20-day simple movingaverage.Non-commercial traders – speculators such as retail traders, hedge funds, and large institutions who use the futures market forspeculative purposes and meet certain requirements.Non-commercial long positions represent the total long open position of non-commercial traders.Non-commercial short positions represent the total short open position of non-commercial traders.The overall non-commercial net position balance is the difference between short and long positions of non-commercial traders.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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