To open long positions on EUR/USD, you need:
In my morning forecast, I paid attention to resistance at 1.2224 and recommended opening short positions from it. The 5-minute chart clearly shows how the bulls are approaching this level, afterwards a sell off of the euro started at the 1.2179 level, which eased the pressure on EUR/USD. But if you missed the first signal, then it's okay. In my afternoon forecast, I recommended opening short positions from the 1.2179 level after testing it from the bottom up. I marked the entry points on the chart. This is exactly what happened. The 1.2179 update brought new large sellers back to the market, which caused the euro to fall to the 1.2138 support area, from where I advised buying the pair immediately on a rebound. In general, the day turned out to be quite profitable and did not create additional problems in determining entry points.
Today, buyers of the euro need to think of a way to protect the 1.2138 level in the morning, which has been tested more than three times now. It is best to open long positions from it, subject to creating a false breakout, which may appear after the publication of the minutes of the European Central Bank December 2020 meeting. If the bears continue to pull down the euro, and are not active around the 1.2138 level, I recommend not to rush into long positions. It is best to open long positions immediately on a rebound from the low of 1.2083, or even lower, from the 1.2042 area, counting on an upward correction of 20-30 points within the day. An equally important task for the bulls is to regain control of the 1.2179 level, which can stop the downward trend and leave the pair hanging in a horizontal channel. Moving averages are in this range, playing on the side of the euro sellers. Being able to surpass and test the 1.2179 level from top to bottom will lead to forming a signal to open new longs in order for EUR/USD to rise to the resistance area of 1.2224. The next target will still be the high of 1.2281, where I recommend taking profits.
To open short positions on EUR/USD, you need:
Sellers of the euro will focus on surpassing and being able to settle below support at 1.2138. A breakout and being able to test this level from the bottom up will create a new signal for opening short positions and will lead the pair to a low of 1.2083, where I recommend taking profits. The next target will be 1.2042, but such an active fall will only be possible after Federal Reserve Chairman Jerome Powell's speech, which will take place in the afternoon. An equally important task for the bears is to protect resistance at 1.2179. If EUR/USD recovers, forming a false breakout there will create a signal for opening shorts in order to sustain the downward trend. If sellers are not active after the resistance test of 1.2179, it is best to refuse to sell, since buyers may try to regain control of the market. In this case, you can take a closer look at shorts only when resistance at 1.2224 has been updated, or sell EUR/USD immediately on a rebound from the high of 1.2281, counting on a downward correction of 20-30 points within the day.
The Commitment of Traders (COT) report for January 5 recorded an increase in both long and short positions. Buyers of risky assets continue to believe in a bullish trend despite the euro's decline earlier this year, which will make it possible for new major players to enter the market. News on the ongoing vaccinations against the first strain of coronavirus in Europe will also support euro buyers. Pressure on the euro will come from isolation measures and quarantines in several European countries. Thus, long non-commercial positions rose from 222,443 to 224,832, while short non-commercial positions jumped from 78,541 to 81,841. Due to the larger increase in short positions, the total non-commercial net position decreased from 143,902 to 142,991 weeks earlier. The insignificant change in the delta at the beginning of the year is unlikely to indicate a change in the tactics of euro buyers, who count on bringing back the single currency's growth after the abolition of quarantine measures in the EU countries.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates a succeeding downward correction for the pair.
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
A breakout of the lower border of the indicator around 1.2138 will increase pressure on the euro. A breakout of the upper border of the indicator in the 1.2179 area 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. 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.
