To open long positions on EUR/USD, you need:
Several rather interesting signals to enter the market appeared yesterday. Let's take a look at the 5-minute chart and break down the entry points. Bulls are confidently getting the pair to settle above 1.2218 in the first half of the day, and amid the absence of important fundamental reports, they are gradually pushing the euro to the resistance of 1.2254. Testing the 1.2218 level from top to bottom became a signal to open long positions. However, we were literally 4 points short from updating the 1.2254 level. In general, growth in the first half of the day was quite good. After the pair returned and settled below support at 1.2217 during the US session, it was tested from the bottom up, which resulted in creating a sell signal. However, the euro did not significantly fall, and the overall decline was around 25 points. I marked all entry points on the chart.
But, before talking about the succeeding prospects for the pair's movement, let's see what happened in the futures market and how the Commitment of Traders (COT) positions changed. Judging by the latest figures, many buyers of the euro have gradually built up long positions, but with more cautious optimism. A less significant increase in the delta occurred due to the fact that sellers also show themselves in the market, who, with each update of the next annual high, raise their short positions. An increase in both short and long positions were recorded in the COT report for December 21. Buyers of risky assets continue to believe in a bull market amid news that vaccination against the first strain of coronavirus has begun in Europe. However, due to the quarantine measures taken after the detection of a new strain of Covid-19 that appeared recently in the UK, there are still quite a few problems. Thus, long non-commercial positions rose from 218,710 to 222,443, while short non-commercial positions jumped from 76,877 to 78,541. The total non-commercial net position rose from 141,833 to 143,902 a week earlier. Delta growth has resumed, but is unlikely to continue at the end of this year, as trading volume will be rather low. Therefore, you should not count on the euro's rapid growth this week, although the low trading volume may lead to a surge in volatility.
Now for the technical picture. Larger players will continue to focus on defending support at 1.2217. Forming a false breakout there in the first half of the day will lead to creating a signal to open long positions in the euro. However, given the lack of important fundamental statistics and the low trading volume in the final week before the new year, one can not count on serious activity in the 1.2217 area. If there isn't much activity in the 1.2217 area, I recommend postponing long positions until the larger support level of 1.2174 has been updated, or buy EUR/USD immediately after rebounding from last week's low in the 1.2130 area, counting on a correction of 20-25 points within the day. We can say that euro buyers managed to bring back the upward trend only when the pair has surpassed and settled above resistance of 1.2254. However, testing this level from top to bottom, similar to yesterday's long deals, which I analyzed above, creates an additional signal to open long positions in euros and by also updating highs of 1.2304 and 1.2339, where I recommend taking profits.
To open short positions on EUR/USD, you need:
Sellers will actively defend resistance at 1.2254, just above which the annual highs pass. Forming a false breakout there will lead to creating a new downward correction, which aims to get the pair to return to support at 1.2217, which is now the middle of the horizontal channel. Getting the pair to settle below this range and testing it from the bottom up will pave the way to a low of 1.2174, where I recommend taking profits. The absence of important fundamental statistics will also affect today's trading volume, so volatility can be quite unpredictable. The succeeding target will be 1.2130, testing it will mean a reversal of the current upward trend. If the bulls find strength and manage to surpass the resistance of 1.2254, I recommend not to rush to sell. The optimal scenario would be a test of the 1.2304 high, from where you can sell EUR/USD immediately on a rebound, counting on the pair's correction down by 20-25 points.
Indicator signals:
Moving averages
Trading is carried out slightly above 30 and 50 moving averages, which indicates that euro buyers are in control of the market.
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 D1 daily chart.
Bollinger Bands
A breakout of the upper border of the indicator around 1.2254 will lead to a new wave of growth. In case the pair falls, support will be provided by the lower border of the indicator in the 1.2195 area.
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.
