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28.06.2022 07:54 AM
EUR/USD: plan for European session on June 28. COT report. EUR hits new weekly high, but fails to consolidate above 1.0603

Conditions for opening long positions on EUR/USD:Yesterday, traders received only one signal to enter the market in the second part of the day. Let us take a look at the 5-minute chart to clear up the market situation. Earlier, I asked you to pay attention to the level of 1.0603 to decide when to enter the market. In the first part of the day, buyers of the euro made an unsuccessful attempt to push the price to the high of 1.0603 recorded last week. As a result, the pair did not reach this level and failed to form a false breakout, which might have allowed traders to open short positions. During the US trade, bulls managed to reach the goal, but did not consolidate above 1.0603 amid strong data from the US. This led to a false breakout and a sell signal. Thus, the pair dropped by about 25 pips.

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Before talking about the future movement of the euro/dollar pair, let's focus on the COT report. According to the COT report from June 21, the number of both long and short positions slumped, pointing to the bearish sentiment. In his recent speech, Jerome Powell confirmed the regulator's intention to raise the benchmark rate even more to combat the highest inflation in the last 40 years. The European Central Bank is also planning to start hiking the key interest rate as early as next month. This is likely to cap the greenback's upward potential against the euro. Since risk assets are significantly oversold, the euro may start recovering just after the beginning of monetary policy tightening. The COT report unveiled that the number of long-commercial positions dropped by 11,432 to 195,554, while the number of short non-commercial positions declined by 1,845 to 211,159. A low price of the euro is making it attractive for buyers. However, traders may switch to the US dollar at any moment amid high inflation and the necessity of a more aggressive policy of central banks. Last week's results showed that the total non-commercial net position remained negative and decreased from -6,018 to -15,605. The weekly closing price rose from 1.0481 to 1.0598.

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Today, the macroeconomic calendar is empty and the eurozone will not publish any report. Comments that will be provided by Chrtistine Lagarde, Philipp Plein, and Fabio Panetta are unlikely to boost volatility as yesterday, traders ignored their interviews. Notably, the politicians did not tackle the monetary policy issue. On the other hand, this fact may encourage buyers of the euro since yesterday, the currency hit new weekly highs and now may show a more significant rise. If the euro drops after Germany's consumer climate data from Gfk, buyers should primarily protect the nearest level of 1.0552. Slightly above this level, there are bullish moving averages. Only a false breakout will give a long signal with the target at the resistance level of 1.0603, which was reached yesterday only in the second part of the day. A breakout and a downward test of this range may negatively affect sellers' stop orders, thus forming a long signal with the target at the high of 1.0640. The next target is located at 1.0663, where it is recommended to lock in profits. If the pair drops and buyers fail to protect 1.0552, pressure on the euro may surge. In this case, it will be better to go long after a false break of the lower limit of the sideways channel at 1.0497. It is also possible to buy the pair from 1.0448 or lower – from 1.0388, expecting a rise of 30-35 pips.

Conditions for opening short positions on EUR/USD:

The likelihood of the bearish movement will be very high until the pair hovers below 1.0603. If the euro/dollar pair increases in the first part of the day after comments of the ECB's representatives, only a false breakout of the resistance level of 1.0603 will give a short signal with the target at support level of 1.0552. A lot depends on this level. A break and settlement below this area as well as an upward test may give an additional sell signal, which may push the price to 1.0497. However, bulls may benefit from correction and enlarge the volume of long positions. It is obvious that the euro is significantly oversold and only a few traders want to open short positions. A break and settlement below 1.0497 will lead to a decline to 1.0448, where traders should leave the market. If the euro/dollar pair climbs during the European session and bears fail to protect 1.0603, traders should avoid sell orders until the price touches the resistance level of 1.0640. A false break of this level will launch a downward correction. It is also possible to sell the euro from the high of 1.0663 or higher – from 1.0687, expecting a drop of 30-35 pips.

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Signals of indicators:

Moving Averages

Trading is performed above 30- and 50-day moving averages, which points to the euro's attempt to gain in value.

Note: The period and prices of moving averages are considered by the author on the one-hour chart that differs from the general definition of the classic daily moving averages on the daily chart.

Bollinger Bands

A break of the lower limit of the indicator of 1.0560 may cause a drop in the euro. A break of the upper limit of 1.0650 may lead to a rise.

Description of indicators
  • Moving average (moving average, determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart.
  • Moving average (moving average, determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph.
  • MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9.
  • Bollinger Bands. The period is 20.
  • Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
  • Long non-commercial positions is a total number of long positions opened by non-commercial traders.
  • Short non-commercial positions is a total number of short positions opened by non-commercial traders.
  • The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.
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