EUR/USD: trading plan for American session on May 23. Analysis of morning trades. EUR resumes downward movement
May 23, 2023 1:22 pm
In my morning article, I turned your attention to 1.0799 and recommended making decisions with this level in focus. Now, let’s look at the 5-minute chart and figure out what actually happened. A breakout and an upward retest of this level gave a sell signal, which resulted in a drop by more than 25 pips. For the afternoon, the technical outlook remained unchanged as well as the strategy.
When to open long positions on EUR/USD:
The euro/dollar pair fell due to weak data on the Euro Area PMI Indices. High interest rates and inflation continue to adversely affect the manufacturing sector and the economy. Only the services sector remains resilient.
In the afternoon, the United States will reveal the same reports. Apart from that, new home sales and the Richmond Fed Manufacturing Index are on tap. If new home sales decline, it will help the euro recover. If the indicator is strong, the pair may drop lower. In this case, it is better to open long positions only after a decrease and a false breakout of a new monthly low of 1.0756. It could lead to an upward movement and a return to the resistance level of 1.0799, which acted as support in the morning. A breakout and a downward retest will boost demand, creating an additional entry point into long positions. The euro could reach a high of 1.0836. A more distant target will be the 1.0870 level where I recommend locking in profits.
If bulls are unable to defend 1.0756 in the afternoon, the bearish trend will prevail. Therefore, only a false breakout of the support level of 1.0716 will give new entry points into long positions. You could buy EUR/USD at a bounce from a low of 1.0674, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Sellers managed to push the pair to the target levels. Now, they are now aiming at 1.0756. Before that, there could be an entry point into short positions at the resistance level of 1.0799. The bears’ main priority is to protect this level. A false breakout will give a sell signal. In this case, the pair could drop to 1.0756. Consolidation below this level as well as an upward may trigger a decline to a low of 1.0716. A more distant target will be the 1.0674 level where I recommend locking in profits.
If EUR/USD rises during the US session and bears show no energy at 1.0799, which is likely only in the case of very weak data on US PMI indices, buyers will try to regain the upper hand. If this scenario comes true, I will advise you to postpone short positions until a false breakout of 1.0836. You could sell EUR/USD at a bounce from 1.0870, keeping in mind a downward intraday correction of 30-35 pips.
COT report
According to the COT report for May 16, there was a decline in long and short positions. However, a drop in short ones turned out to be larger. The corrective downward movement of the euro that occurred last week created excellent entry points into long positions. As long as US lawmakers do not reach an agreement on the debt ceiling, demand for risky assets is likely to remain low. Traders are even ignoring the statements of Fed policymakers, who hinted at a pause at the next meeting. This is a bullish factor for the euro. So, when the Biden administration and Congress strike a deal on the debt ceiling, bulls will return to the market. The COT report showed that long non-commercial positions decreased by only 1,599, to 258,736, while short non-commercial positions tumbled by 9,266 to 71,647. At the end of the week, the total non-commercial net position grew to 187,089 against 179,422. The weekly closing price declined to 1.0889 against 1.0992.
Indicators’ signals:
Trading is carried out below the 30 and 50 daily moving averages, which indicates a bear market.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If EUR/USD rises, the indicator’s upper border at 1.0830 will serve as resistance.
Description of indicators
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com
In my morning article, I turned your attention to 1.0799 and recommended making decisions with this level in focus. Now, let’s look at the 5-minute chart and figure out what actually happened. A breakout and an upward retest of this level gave a sell signal, which resulted in a drop by more than 25 pips. For the afternoon, the technical outlook remained unchanged as well as the strategy.
When to open long positions on EUR/USD:
The euro/dollar pair fell due to weak data on the Euro Area PMI Indices. High interest rates and inflation continue to adversely affect the manufacturing sector and the economy. Only the services sector remains resilient.
In the afternoon, the United States will reveal the same reports. Apart from that, new home sales and the Richmond Fed Manufacturing Index are on tap. If new home sales decline, it will help the euro recover. If the indicator is strong, the pair may drop lower. In this case, it is better to open long positions only after a decrease and a false breakout of a new monthly low of 1.0756. It could lead to an upward movement and a return to the resistance level of 1.0799, which acted as support in the morning. A breakout and a downward retest will boost demand, creating an additional entry point into long positions. The euro could reach a high of 1.0836. A more distant target will be the 1.0870 level where I recommend locking in profits.
If bulls are unable to defend 1.0756 in the afternoon, the bearish trend will prevail. Therefore, only a false breakout of the support level of 1.0716 will give new entry points into long positions. You could buy EUR/USD at a bounce from a low of 1.0674, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Sellers managed to push the pair to the target levels. Now, they are now aiming at 1.0756. Before that, there could be an entry point into short positions at the resistance level of 1.0799. The bears’ main priority is to protect this level. A false breakout will give a sell signal. In this case, the pair could drop to 1.0756. Consolidation below this level as well as an upward may trigger a decline to a low of 1.0716. A more distant target will be the 1.0674 level where I recommend locking in profits.
If EUR/USD rises during the US session and bears show no energy at 1.0799, which is likely only in the case of very weak data on US PMI indices, buyers will try to regain the upper hand. If this scenario comes true, I will advise you to postpone short positions until a false breakout of 1.0836. You could sell EUR/USD at a bounce from 1.0870, keeping in mind a downward intraday correction of 30-35 pips.
COT report
According to the COT report for May 16, there was a decline in long and short positions. However, a drop in short ones turned out to be larger. The corrective downward movement of the euro that occurred last week created excellent entry points into long positions. As long as US lawmakers do not reach an agreement on the debt ceiling, demand for risky assets is likely to remain low. Traders are even ignoring the statements of Fed policymakers, who hinted at a pause at the next meeting. This is a bullish factor for the euro. So, when the Biden administration and Congress strike a deal on the debt ceiling, bulls will return to the market. The COT report showed that long non-commercial positions decreased by only 1,599, to 258,736, while short non-commercial positions tumbled by 9,266 to 71,647. At the end of the week, the total non-commercial net position grew to 187,089 against 179,422. The weekly closing price declined to 1.0889 against 1.0992.
Indicators’ signals:
Trading is carried out below the 30 and 50 daily moving averages, which indicates a bear market.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If EUR/USD rises, the indicator’s upper border at 1.0830 will serve as resistance.
Description of indicators
The material has been provided by InstaForex Company – www.instaforex.com
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