To open long positions on EUR/USD, you need:
Several signals to enter the market appeared yesterday. The bulls surpassed 1.2130 in the first half of the day during the European session. Being able to test this level from top to bottom resulted in a good long entry point, which was fully realized during the speech of European Central Bank President Christine Lagarde. I recommended taking profits and opening short positions from the 1.2174 level. Selling from 1.2174 led to a slight downward correction of 20 points. There were no other signals to enter the market.
Considering that the pair spent the afternoon in a horizontal channel, from a technical point of view, nothing has changed much. Lagarde's speech was rather deterrent, although many expected that she would outline a brighter outlook for the economy. This did not happen, and neither did a major rise in the euro. The whole emphasis has shifted to the 1.2174 level. A breakthrough of this range and being able to test it from top to bottom creates a good signal to enter long positions in hopes to reach a high of 1.2220, where I recommend taking profits. A high of 1.2260 is a distant target, and such a breakthrough is hardly possible today. If the bulls are unable to do anything at the 1.2178 level in the first half of the day, then there is a risk of a downward correction to the support area of 1.2138, where a false breakout will be a signal to open longs in sustaining the trend. There are also moving averages that play on the side of the euro buyers. If buyers are noticeably inactive at the 1.2138 area, then it is best to wait for a downward correction to the more powerful area of 1.2098, where the lower border of the new rising channel passes. You can open long positions immediately on a rebound from it, counting on an upward movement of 20-25 points within the day.
To open short positions on EUR/USD, you need:
Sellers of the euro will focus on forming a false breakout in the resistance area of 1.2178. However, only weak fundamental data on the European economy, and since a number of important reports on activity in the manufacturing and services sectors will be released today, could significantly weigh on the euro, which will open a direct way to the area of yesterday's support at 1.2138. Moving averages also pass there, so it will hardly be possible to fall below this level the first time. A lot depends on this range, as its breakout will result in removing a number of stop orders of the bulls and EUR/USD could fall to the 1.2098 area, where the lower border of the current rising channel passes. I recommend taking profit there. If the euro grows above the 1.2178 level in the first half of the day, it is best not to rush to sell, but wait for an update of resistance at 1.2220, where forming a false breakout will be a signal to open short positions. I recommend selling EUR/USD immediately on a rebound from the 1.2260 area, counting on a downward correction of 20-30 points within the day.
The Commitment of Traders (COT) report for January 12 recorded a sharp increase in long positions and a reduction in short ones. Buyers of risky assets continue to believe in a bullish trend, especially after such a large decline in the euro earlier this year, which made it possible for new large players to enter the market. Vaccination against the first strain of coronavirus continues in Europe, leading to new buyers for the euro. The likely approval of the next $1.9 trillion bailout plan for the US economy is likely to further erode the dollar. A limiting factor for the euro's growth is the risk of extending quarantine measures in February this year, both in Germany and in a number of other European countries. Thus, long non-commercial positions increased from 224,832 to 228,757, while short non-commercial positions fell from 81,841 to 72,867. Due to the sharp drop in short positions, the total non-commercial net position increased from 143,902 to 155,890 a week earlier.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates an attempt by euro buyers to return to 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 daily D1 chart.
Bollinger Bands
A breakout of the upper border of the indicator in the 1.2130 area will lead to a new wave of euro growth. A breakout of the lower boundary at 1.2089 will increase pressure on the pair.
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.
