To open long positions on EUR/USD, you need:
Last Friday no signals were formed for the euro to enter the market. If you look at the 5-minute chart, you will see that the euro surpassed 1.2145, but I did not wait for the reverse test of this level from the bottom up to produce a convenient entry point to the market. As a result, the signal was missed. Good data on consumer sentiment in the US did not provide much support for the euro, as the focus shifted to news on the coronavirus vaccine. The approval of its distribution is good news for euro buyers who believe in strengthening the EUR/USD pair.
But, before talking about the pair's further prospects, let's see what happened in the futures market and how the Commitment of Traders (COT) positions changed. Changes were very significant, and they are all in the direction of euro buyers. Many market participants continue to bet on the strengthening of the euro, even at current annual highs. Last week's news about the expansion of the asset repurchase program did not affect the quotes in any way, and the likelihood of a later introduction of strict quarantine measures in the United States forces traders to bypass the US dollar. The COT report for December 8 recorded an increase in long positions and a reduction in short positions. Buyers of risky assets believe in sustaining the bull market and the euro's growth after surpassing the psychological mark in the area of the 20th figure. Thus, long non-commercial positions rose from 207,302 to 222,521, while short non-commercial positions fell from 67,407 to 66,092. The total non-commercial net position rose from 139,894 to 156,429 a week earlier. It is worth paying attention to the growth of the delta, observed for the third consecutive week, which completely negates the bearish trend observed at the beginning of this fall. We can only speak of a larger recovery after European leaders negotiate a new trade agreement with Britain. Neither the EU summit nor the decision of the European Central Bank managed to exert pressure on the euro, so it is best to bet that the EUR/USD pair will continue to strengthen by the end of the year.
Now for the technical picture of the pair. Buyers need to take control of resistance at 1.2164, as only this can lead to another upward wave and will continue to produce a bull market. Being able to overcome and settle above 1.2164 and test it from top to bottom produces a good signal to buy EUR/USD in hopes of renewing the next high in the 1.2211 area, where I recommend taking profits. The next target will be the high of 1.2255, which buyers will be aiming for this week. Since we will not receive important fundamental statistics on the eurozone economy today, it will hardly be possible to count on surpassing 1.2255. However, if this happens, I recommend building up long positions to the highs of 1.2339 and 1.2417. In case the euro falls in the first half of the day and buyers are unable to go above 1.2164, it is best not to rush with long positions, but to wait until a false breakout forms in the support area of 1.2110. I recommend buying EUR/USD immediately on a rebound from a low of 1.2060, counting on a correction by 20-25 points within the day.
To open short positions on EUR/USD, you need:
Sellers will actively defend resistance at 1.2164, just above which the annual highs pass. Forming a false breakout there will lead to a new downward correction, which will be aimed at breaking the 1.2110 low. Being able to settle below this range will open a direct road to the 1.2060 area, where I recommend taking profits. The next target will be the 1.1986 area, a test of which will mean a reversal of the current upward trend. If the bulls find strength following the speeches of the ECB representatives and the data on German prices, and they also manage to surpass the resistance of 1.2164, I recommend not to rush to sell. The optimal scenario would be a test of the 1.2211 high, where a false breakout will be a signal to sell the euro. I recommend opening short positions immediately on a rebound from the 1.2255 level, counting on the pair's correction down by 15-20 points.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates that the pair is hanging in a horizontal channel.
Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
Volatility is quite low, so I would recommend not paying attention to the indicators in the morning.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in 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 short and long positions of non-commercial traders.
