EUR/USD: trading plan for European session on October 16, 2023. COT report and overview of Friday’s trades. Euro continues
October 16, 2023 9:23 am
Last Friday, the pair formed several entry signals. Let’s have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.0559 as a possible entry point. A rise and a false breakout at this mark formed a sell signal, sending the price down by more than 40 pips. In the afternoon, a false breakout at 1.0527 produced another sell signal, which renewed the daily lows and the pair fell to 1.0508.
For long positions on EUR/USD:
Friday’s US data exerted downward pressure on EURUSD, which could form a new downtrend. Today, traders now look to the release of the Italian consumer price index and eurozone foreign trade balance, which are unlikely to leave a strong impression, so the pressure on the pair may return at any moment. For this reason, the bulls need to be active in the area of the new support at 1.0509, formed at the end of last week. A false breakout around that mark will confirm the entry point for long positions, in hopes of building an upward correction and reaching the nearest resistance at 1.0535, which is in line with the bearish moving averages. A breakout and a downward test of this range will provide a chance for a surge to 1.0557. The furthest target would be the 1.0586 area, where I plan to take profits. If EUR/USD declines and there is no activity at 1.0509, pressure on the euro could increase and the sellers will reclaim the initiative. In such a case, only a false breakout near 1.0484 will signal a buying opportunity. I will open long positions directly on a rebound from 1.0451, aiming for an upward correction of 30-35 pips within the day.
For short positions on EUR/USD:
The bears are in control of the market. Defending the nearest resistance level at 1.0535, as well as weak eurozone economic data, will be enough for the pair to fall further. A false breakout at this point will generate a sell signal, with a prospect of a decline towards the 1.0509 support. A breakout and consolidation below this range, as well as its upward retest, will give another sell signal with the target at the low of 1.0484. The ultimate target will be this month’s low at 1.0451 where I will take profits. If EUR/USD rises during the European session and bears are absent at 1.0535, bulls will surely try to return to the market. In this scenario, I will delay going short until the price hits the resistance at 1.0557. I may consider selling there but only after a failed consolidation. I will go short immediately on a rebound from a high of 1.0586, aiming for a downward correction of 30-35 pips.
COT report:
The Commitments of Traders report for October 3 recorded a minimal rise in long positions and a sharp increase in short positions. Apparently, after the central banks’ meetings, markets realized that interest rates will be raised further in the fight against inflation. This will definitely drive the US dollar higher which is already reflected in the COT reports. Notably, these reports have not yet factored in the changes caused by the recent US jobs data which twice exceeded the forecast. In addition, the military conflict in the Middle East also undermines risk sentiment, thus spurring demand for safe-haven assets such as the US dollar. The COT report indicates that non-commercial long positions went up by just 267 to stand at 211,783, while non-commercial short positions jumped by 19,723, reaching a total of 132,840. As a result, the spread between long and short positions increased by 1,187. The closing price dropped to 1.0509 from 1.0604, further underscoring the bearish market sentiment.
Indicator signals:
Moving averages:
Trading below the 30- and 50-day moving averages indicates that sellers are regaining control of the market.
a further downtrend in the pair.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If EUR/USD declines, the indicator’s lower border around 1.0500 will serve as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;
• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com
Last Friday, the pair formed several entry signals. Let’s have a look at what happened on the 5-minute chart. In my morning review, I mentioned the level of 1.0559 as a possible entry point. A rise and a false breakout at this mark formed a sell signal, sending the price down by more than 40 pips. In the afternoon, a false breakout at 1.0527 produced another sell signal, which renewed the daily lows and the pair fell to 1.0508.
For long positions on EUR/USD:
Friday’s US data exerted downward pressure on EURUSD, which could form a new downtrend. Today, traders now look to the release of the Italian consumer price index and eurozone foreign trade balance, which are unlikely to leave a strong impression, so the pressure on the pair may return at any moment. For this reason, the bulls need to be active in the area of the new support at 1.0509, formed at the end of last week. A false breakout around that mark will confirm the entry point for long positions, in hopes of building an upward correction and reaching the nearest resistance at 1.0535, which is in line with the bearish moving averages. A breakout and a downward test of this range will provide a chance for a surge to 1.0557. The furthest target would be the 1.0586 area, where I plan to take profits. If EUR/USD declines and there is no activity at 1.0509, pressure on the euro could increase and the sellers will reclaim the initiative. In such a case, only a false breakout near 1.0484 will signal a buying opportunity. I will open long positions directly on a rebound from 1.0451, aiming for an upward correction of 30-35 pips within the day.
For short positions on EUR/USD:
The bears are in control of the market. Defending the nearest resistance level at 1.0535, as well as weak eurozone economic data, will be enough for the pair to fall further. A false breakout at this point will generate a sell signal, with a prospect of a decline towards the 1.0509 support. A breakout and consolidation below this range, as well as its upward retest, will give another sell signal with the target at the low of 1.0484. The ultimate target will be this month’s low at 1.0451 where I will take profits. If EUR/USD rises during the European session and bears are absent at 1.0535, bulls will surely try to return to the market. In this scenario, I will delay going short until the price hits the resistance at 1.0557. I may consider selling there but only after a failed consolidation. I will go short immediately on a rebound from a high of 1.0586, aiming for a downward correction of 30-35 pips.
COT report:
The Commitments of Traders report for October 3 recorded a minimal rise in long positions and a sharp increase in short positions. Apparently, after the central banks’ meetings, markets realized that interest rates will be raised further in the fight against inflation. This will definitely drive the US dollar higher which is already reflected in the COT reports. Notably, these reports have not yet factored in the changes caused by the recent US jobs data which twice exceeded the forecast. In addition, the military conflict in the Middle East also undermines risk sentiment, thus spurring demand for safe-haven assets such as the US dollar. The COT report indicates that non-commercial long positions went up by just 267 to stand at 211,783, while non-commercial short positions jumped by 19,723, reaching a total of 132,840. As a result, the spread between long and short positions increased by 1,187. The closing price dropped to 1.0509 from 1.0604, further underscoring the bearish market sentiment.
Indicator signals:
Moving averages:
Trading below the 30- and 50-day moving averages indicates that sellers are regaining control of the market.
a further downtrend in the pair.
Please note that the time period and levels of the moving averages are analyzed only for the H1 chart, which differs from the general definition of the classic daily moving averages on the D1 chart.
Bollinger Bands
If EUR/USD declines, the indicator’s lower border around 1.0500 will serve as support.
Description of indicators:
• A moving average of a 50-day period determines the current trend by smoothing volatility and noise; marked in yellow on the chart;
• A moving average of a 30-day period determines the current trend by smoothing volatility and noise; marked in green on the chart;
• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA with a 12-day period; Slow EMA with a 26-day period. SMA with a 9-day period;
• Bollinger Bands: 20-day period;
• Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements;
• Long non-commercial positions represent the total number of long positions opened by non-commercial traders;
• Short non-commercial positions represent the total number of short positions opened by non-commercial traders;
• The non-commercial net position is the difference between short and long positions of non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com
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