EUR/USD: trading plan for American session on May 5. Overview of morning trades. EUR declines ahead of NFP data
May 5, 2023 1:23 pm
In my morning article, I turned your attention to 1.1029 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 decline to this level occurred quite quickly. There were no entry points at this level as trading was carried out near 1.1029. For the afternoon, the technical outlook remained unrevised.
When to open long positions on EUR/USD:
In the afternoon, I expect a fairly strong surge in volatility. Given that the pair remained in a correction phase before the release of initial jobless claims and NonFarm Payrolls data, it is better to focus on 1.0988 instead of 1.1029. I would advise you to open long positions on the euro only after a decline and a false breakout there. It could lead to a buy signal with an increase to the resistance level of 1.1029. The pair is likely to rise above this level only in the event of a sharp surge in unemployment in the United States. A breakout and a downward retest of 1.1029 will boost a bullish trend, creating an additional entry point into long positions. The pair could climb to 1.1060. A more distant target will be the 1.1090 level where I recommend locking in profits.
If EUR/USD declines and bulls show no activity at 1.0988 in the afternoon, the sentiment could change markedly. It is likely to undermine a bullish bias and trigger a drop in Stop Loss orders. Only a false breakout of the next support level of 1.0944 will give entry points into long positions. You could buy EUR/USD at a bounce from 1.0911, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Sellers are not ready to give up. Traders are now anticipating NFP data So, EUR/USD could drop even more. If the report is mixed or it is in line with economists’ forecasts, bears get an excellent chance to defend 1.1029. There could be a false breakout of 1.1029, giving a good entry point into short positions with the prospect of a drop to the support level of 1.0988. A fall below this level as well as an upward test could cause a downward movement to 1.0944. A more distant target will be the 1.0911 level where I recommend locking in profits.
If EUR/USD rises during the US session and bears show no energy at 1.1029, which is quite likely, given that NFP data for April could exceed the March figure, it is better to postpone short positions until a false breakout of 1.1060. You could sell EUR/USD at a bounce from 1.1090, keeping in mind a downward intraday correction of 30-35 pips.
COT report
The COT report (Commitments of Traders) for April 25 logged an increase in long positions and a decrease in short positions. Despite some market moves ahead of the Federal Reserve meeting, where rates will definitely be raised by 0.25%, traders are not in a hurry to close long positions on EUR/USD as they expect more aggressive policy from the European Central Bank. The risk of a recession in the US and a rapid slowdown in the economy, along with problems in the banking sector, also allow traders to bet on growth in risky assets in the medium term, which is beneficial to EUR buyers. The COT report shows that non-commercial long positions rose by 1,147 to 243,516, while non-commercial short positions declined by 3,892 to 74,116. As a result, the total non-commercial net position went up last week to 144,892 against 139,956 a week earlier. EUR/USD closed last week lower at 1.1006 from the closing price of 1.1010 in the previous week.
Indicators’ signals:
Trading is carried out near the 30 and 50 daily moving averages, which indicates market uncertainty.
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 1.1050 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 1.1029 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 decline to this level occurred quite quickly. There were no entry points at this level as trading was carried out near 1.1029. For the afternoon, the technical outlook remained unrevised.
When to open long positions on EUR/USD:
In the afternoon, I expect a fairly strong surge in volatility. Given that the pair remained in a correction phase before the release of initial jobless claims and NonFarm Payrolls data, it is better to focus on 1.0988 instead of 1.1029. I would advise you to open long positions on the euro only after a decline and a false breakout there. It could lead to a buy signal with an increase to the resistance level of 1.1029. The pair is likely to rise above this level only in the event of a sharp surge in unemployment in the United States. A breakout and a downward retest of 1.1029 will boost a bullish trend, creating an additional entry point into long positions. The pair could climb to 1.1060. A more distant target will be the 1.1090 level where I recommend locking in profits.
If EUR/USD declines and bulls show no activity at 1.0988 in the afternoon, the sentiment could change markedly. It is likely to undermine a bullish bias and trigger a drop in Stop Loss orders. Only a false breakout of the next support level of 1.0944 will give entry points into long positions. You could buy EUR/USD at a bounce from 1.0911, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Sellers are not ready to give up. Traders are now anticipating NFP data So, EUR/USD could drop even more. If the report is mixed or it is in line with economists’ forecasts, bears get an excellent chance to defend 1.1029. There could be a false breakout of 1.1029, giving a good entry point into short positions with the prospect of a drop to the support level of 1.0988. A fall below this level as well as an upward test could cause a downward movement to 1.0944. A more distant target will be the 1.0911 level where I recommend locking in profits.
If EUR/USD rises during the US session and bears show no energy at 1.1029, which is quite likely, given that NFP data for April could exceed the March figure, it is better to postpone short positions until a false breakout of 1.1060. You could sell EUR/USD at a bounce from 1.1090, keeping in mind a downward intraday correction of 30-35 pips.
COT report
The COT report (Commitments of Traders) for April 25 logged an increase in long positions and a decrease in short positions. Despite some market moves ahead of the Federal Reserve meeting, where rates will definitely be raised by 0.25%, traders are not in a hurry to close long positions on EUR/USD as they expect more aggressive policy from the European Central Bank. The risk of a recession in the US and a rapid slowdown in the economy, along with problems in the banking sector, also allow traders to bet on growth in risky assets in the medium term, which is beneficial to EUR buyers. The COT report shows that non-commercial long positions rose by 1,147 to 243,516, while non-commercial short positions declined by 3,892 to 74,116. As a result, the total non-commercial net position went up last week to 144,892 against 139,956 a week earlier. EUR/USD closed last week lower at 1.1006 from the closing price of 1.1010 in the previous week.
Indicators’ signals:
Trading is carried out near the 30 and 50 daily moving averages, which indicates market uncertainty.
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 1.1050 will serve as resistance.
Description of indicators
The material has been provided by InstaForex Company – www.instaforex.com
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