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21.07.2021 12:53 PM
EUR/USD: plan for the US session on July 21 (analysis of morning deals).

To open long positions on EURUSD, you need:

Despite the absence of important fundamental statistics, the volatility in the EUR/USD pair remains at a sufficiently normal level to allow making decisions on entering the market. Let's look at the 5-minute chart and analyze the entry points. After an unsuccessful attempt by the bears to gain a foothold below the support of 1.1757, the bulls quickly regain control of the market by forming a false breakdown, which forms a signal to open long positions hoping to recover to the resistance of 1.1779. The upward movement brought about 20 points – almost all the intraday volatility. For the second half of the day, the technical picture has not changed in any way and the decision-making strategy.

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In the afternoon, there are also no important fundamental statistics today. Thus, traders will continue to sit "on the fence," thinking about how the European Central Bank will behave tomorrow and what statements will be made by President Christine Lagarde. As noted in the morning forecast, this meeting is very important from the point of view of revaluation of the approach to monetary policy by the European Central Bank, which will directly affect the long-term direction of the euro. According to the central bank's latest forecast, the first increase in interest rates was expected at the end of 2022. However, many are predicting a revision of the forecast for 2024, which could severely hit the positions of euro buyers. In the first half of the day, buyers coped with their main task and defended the support of 1.1757, where an excellent signal was formed to buy the euro. In the second half of the day, buyers' focus will shift to the level of 1.1779, which acts as a kind of middle of the side channel. Only a breakout and consolidation in this range, followed by its test from top to bottom, will form a signal to open long positions in the expectation of growth to the resistance of 1.1801. The longer-range target of the bulls will be the upper limit of the side channel 1.1825, where I recommend fixing the profits. In the scenario of a decline in EUR/USD during US trading, the bulls will need to try very hard again to protect the support of 1.1757. Only the formation of a false breakout, similar to the entry point in the first half of the day, will help ease the pressure on the euro in the short term, leading to the pair's growth. In case of weak buyer activity in the area of 1.1757, I advise you to postpone long positions and wait for the update of the next local minimum in the area of 1.1740 from where you can buy EUR/USD immediately for a rebound, counting on an upward correction of 15-20 points within the day.

To open short positions on EURUSD, you need:

The bears achieved the first goal and managed to update the minimum of yesterday, which keeps the market on their side. Most likely, in the second half of the day, against the background of the lack of important fundamental statistics, they will have to focus their attention around the level of 1.1779. Only the formation of a false breakdown on it forms a signal to open short positions in the expectation of continuing the bearish trend formed at the beginning of this week. The nearest target will be the support of 1.1757 since its breakdown depends on whether the pair will remain under the control of sellers or not. Fixing below this range and testing it from the bottom up will form an excellent signal to open additional short positions in the expectation that the pair will fall to the minimum of 1.1740. A more distant target will be the area of 1.1715, where I recommend fixing the profits. In the case of EUR/USD growth during the US session and the absence of bull activity at the level of 1.1779, it is best to postpone sales until the test of a larger resistance of 1.1801. It is also possible to sell the pair immediately for a rebound based on a downward correction of 15-20 points from the maximum of 1.1825.

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In the COT report (Commitment of Traders) for July 13, there was a market bias towards sellers of risky assets. And although the long positions have not changed in any way, the sharp growth of short positions has led to another reduction in the overall positive net position. The fact that American inflation continues to grow and both Jerome Powell and US President Joe Biden speak about it indicates the seriousness of the situation. And no matter how the central bank tries to convince investors that this is just a temporary phenomenon, the market continues to abandon risky assets favoring safe-haven assets, which is the US dollar. This week, the picture can only get worse, as the European Central Bank will hold a meeting on Thursday. Politicians will announce a new mandate regarding the long-term rate of inflation in the eurozone, which may lead to a revision of plans for monetary policy in the near future. It will be a certain shock for the euro, and it isn't easy to guess what the market reaction will be. But the lower the euro falls, the higher the demand for it will be in the medium term since the attractiveness of risky assets has not gone away. The COT report indicates that long non-commercial positions remained virtually unchanged and decreased from the level of 212,998 to the level of 212,851.

In contrast, short non-commercial positions increased from the level of 135,808 to the level of 153,138. In addition to the decision of the European Central Bank, we are waiting for interesting fundamental statistics on the activity of the service sector and the manufacturing sector of the eurozone countries, which can affect the direction of the euro in the short term. The total non-commercial net position decreased from the level of 77,190 to the level of 59,713. The weekly closing price remained unchanged at 1.1862.

Signals of indicators:

Moving averages

Trading is conducted in 30 and 50 daily moving averages, which indicates the lateral nature of the market.

Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.

Bollinger Bands

A breakthrough of the upper limit of the indicator in the area of 1.1790 will lead to a new wave of euro growth.

Description of indicators

  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
  • Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
  • MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
  • Bollinger Bands (Bollinger Bands). Period 20
  • Non-profit speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet specific 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.
Miroslaw Bawulski,
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