To open long positions on EUR/USD, you need:
Apart from yesterday's signal to buy the euro, which I analyzed in detail in my forecast, nothing else was interesting. I focused on the 1.2138 level and recommended making decisions from it when the pair drops to this range. The 5-minute chart shows that when the 1.2138 level was initially tested, the bulls coped with the task and did not let the pair fall below this range, the second false breakout became an excellent signal to enter long positions. The movement was around 30 points. The pair returned to support at 1.2138 during the US session, afterwards the quote fell below it. However, I never got a signal to sell the euro.
The first support level has changed and today euro buyers need to think of a way to protect the 1.2144 area in the morning, from which the whole movement began yesterday. It is best to open longs from it if a false breakout is created (similar to the entry point that I analyzed above), which can appear after the eurozone report is released. If the bears continue to pull down the euro, and it is not active around the 1.2144 level, I recommend not to rush to buy, but to wait until the low at 1.2113 has been updated, which surfaced yesterday afternoon. Forming a false breakout there creates a good entry point into longs. It is best to buy EUR/USD immediately on a rebound from the low of 1.2042, counting on an upward correction of 20-30 points within the day. An equally important task for the bulls is to regain control over the 1.2179 level, which can stop the downward trend and result in creating an upward correction for the pair. Being able to surpass and test the 1.2179 level from top to bottom will lead to creating a signal to open new longs in order for EUR/USD to rise to the resistance area of 1.2220. Buyers will still aim for a high of 1.2281, where I recommend taking profits.
To open short positions on EUR/USD, you need:
Euro sellers will focus on being able to settle below support at 1.2144. A breakout and a test of this level from the bottom up will create a new signal to open short positions and open a direct road to yesterday's low of 1.2113, where I recommend taking profits. Succeeding targets are 1.2080 and 1.2042, but such an active fall will only be possible if we receive very weak reports on the eurozone's foreign trade balance and inflation in Italy and Spain. An equally important task for the bears is to protect resistance at 1.2179. If EUR/USD recovers, forming a false breakout there creates a signal to open shorts in order to sustain the downward trend. If sellers are not active after resistance at 1.2179 has been tested, then 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 has been updated at 1.2220, 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 in the area of 30 and 50 moving averages, which indicates some uncertainty with the pair's succeeding direction.
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
In case the euro falls, support will be provided by the lower border of the indicator in the 1.2125 area. A breakout of the upper border around 1.2179 will lead to forming a new wave of EUR/USD 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.
