To open long positions on EUR/USD, you need:
The European currency fell against the US dollar yesterday despite the good fundamental data for Germany and the high likelihood of a faster economic recovery after the coronavirus pandemic, as many market participants fear the outbreak of the second wave of COVID-19. It was not possible to wait for a more or less suitable signal to open short positions in the euro yesterday afternoon. If you look at the 5-minute chart, you will see how the 1.1272 level I indicated was completely smeared, which did not allow us to enter the market in short positions in order to continue the downward correction. The emphasis shifted to resistance 1.1280 today in the morning. It is a return to this level that will allow euro buyers to count on keeping the market under their control and on growth by the end of the week in the resistance area of 1.1321, where I recommend taking profits. An equally important task is to protect support at 1.1224, from which we observed a large increase in EUR/USD on Tuesday. Forming a false breakout there will be a signal to buy the euro. In the absence of activity and a quick upward movement from this level, it is best to postpone long positions in the euro until the low of 1.1204 is updated, counting on a rebound from it of 25-30 points by the end of the day. It is also necessary to remember the COT reports, which clearly indicate the preservation of the bullish momentum in the market. Any decline in the euro will make the market more suitable for purchases by institutional investors. During the reporting week, a short non-commercial position was reduced from 89,020 to 69,988, while long non-commercial positions sharply rose from 184,669 to 187,120. As a result, the positive non-commercial net position rose again to 117 132, against 95,639, which indicates an increase in interest in buying risky assets even at current prices high enough for the market.
To open short positions on EUR/USD, you need:
Sellers have managed to cool the ardor of buyers of risky assets, and today's European Central Bank report from the monetary policy meeting could put even more pressure on the euro, since there is no place to wait for the eurozone. Bears will aim to break through and consolidate below support 1.1234, which will be a signal to open short positions in order to continue pulling down EUR /USD to the area of a larger support of 1.1204, where I recommend taking profits. Apparently, testing 1.1204 will lead to a complete change in the upward trend observed in the euro this week. In case of an upward correction of the pair in the morning, the bears will be noticeable in the resistance area of 1.1280, where the formation of a false breakout will also be a signal to sell the euro. Moving averages are also taking place there now. Otherwise, short positions can be opened on a rebound from a high of 1.1321, based on a correction of 20-30 points within the day.
Signals of indicators:
Moving averages
Trading is conducted below 30 and 50 moving average, which indicates an attempt to return the market under their control by the bears.
Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differs from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger bands
A break of the lower border of the indicator in the region of 1.1225 will increase pressure on the euro. It is possible to count on an upward correction only after a breakout of the average indicator border in the region of 1.1265.
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-commercial traders are speculators, 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 nonprofit traders.
- Short non-commercial positions represent the total short open position of non-profit traders.
- The total non-commercial net position is the difference between short and long positions of non-profit traders.
