To open long positions on EUR/USD, you need:
Good data on the services and manufacturing sectors in the US did not make it possible for euro buyers to resume the upward trend last Friday. Only one signal to sell the euro was generated in the first half of the day. Let me remind you that in my Friday morning forecast I paid attention to the 1.2178 level and recommended to act based on it. The bulls made an unsuccessful attempt to surpass this area, afterwards a false breakout was formed, which caused the pair to return to the area below the 1.2178 level. Testing this level from the bottom up created a convenient entry point for short positions, but this did not lead to a large downward trend.
From a technical point of view, not much has changed either. Buyers will focus on the resistance level of 1.2187 in the first half of the day, which was formed last Friday. Surpassing this range and being able to test it from top to bottom creates a good signal to enter long positions with the purpose of reaching a high of 1.2220, where I recommend taking profits. A further challenge for euro buyers will still be the 1.2260 high, but such a breakthrough will only be possible following European Central Bank President Christine Lagarde's speech, and provided that she mentions the prospects of the European economy and gives a new positive assessment. If the bulls fail to do anything at the 1.2187 level during the European session, then there is a risk of a downward correction to the support area of 1.2138. Forming a false breakout there will be a signal to open long positions in sustaining the trend. If there is no noticeable activity from buyers around 1.2138, it is best to wait for EUR/USD to fall to a more powerful area of 1.2098, where the lower border of the new rising channel passes. From it, you can open long positions immediately on a rebound, counting on an upward movement of 20-25 points within the day.
To open short positions on EUR/USD, you need:
An important task for the bears is to maintain control over this level, and forming the next false breakout there will become an additional entry point to short positions for the purpose of a downward correction on the euro. An equally important task will be returning to support at 1.2138, during the first test of which profit taking on short positions and a small rebound of the pair will be evident. A breakout and being able to test the 1.2138 level from the bottom up, as well as the breakout of the moving averages, creates an excellent signal to open short positions for the purpose of a larger downward correction to the support area at 1.2098, behind which an active opposition will unfold again. The lower border of the rising correctional channel is also located there. If bears are not active in the resistance area of 1.2187 in the first half of the day, and a breakout of this area will occur only if we receive good data from the IFO Institute for Economic Assessment and German expectations, I recommend postponing the sale of the euro and waiting for the 1.2220 area to update. You can open short positions from there if a false breakout is formed. I recommend selling EUR/USD immediately on a rebound from a high of 1.2260, counting on a downward correction of 20-25 points within the day.
Let me remind you that the Commitment of Traders (COT) report for January 12 recorded a sharp increase in long positions and a decrease in short ones. Buyers of risky assets continue to believe in a bullish trend, despite the euro's decline at the beginning of this year, and it makes it possible for new major players to enter the market. News of ongoing vaccinations against the first strain of coronavirus Europe is causing new euro buyers to enter the market. 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 rose 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 rose to 155,890 from 143,902 a week earlier.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates uncertainty regarding the market'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
A breakout of the upper border of the indicator in the 1.2187 area will lead to a new wave of euro growth. A breakout of the lower boundary at 1.2155 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.
