To open long positions on EUR/USD, you need:
Yesterday, there was only one signal to enter the market at the end of the US session, which did not bring much success. In my morning forecast, I paid attention to the 1.2178 level and recommended to act based on it. Let's take a look at the 5-minute chart and talk about what happened. We see how the bulls failed to reach this level, as a result of which there were no signals to enter the market. Weak reports on the indices of the IFO Institute in Germany caused EUR/USD to fall in the morning. The bears managed to surpass the 1.2138 level in the afternoon, but it's reverse test took place at the end of the US session, which left very little hope for the euro to fall further. And so it happened. The sell signal did not justify itself, and the pair continued to trade around the 1.2138 level, where it is at the time of this writing.
Before talking about the further prospects for the EUR/USD movement, let's see what happened in the futures market and how the Commitment of Traders (COT) positions changed. Judging by the presented chart, any decrease in the euro is immediately perceived by buyers as a more convenient point for building up long positions. This happened in the reporting week. The COT report for January 19 recorded a sharp increase in long positions and a slight increase in short ones. Despite all the incoming fundamental data and the preservation of a number of quarantine restrictions until February this year in many European countries, buyers of risky assets continue to believe in a bullish trend. Demand especially appears with every significant downward correction from this year's highs, which allows new major players to enter the market. Vaccination disruptions in Europe are preventing risky asset buyers from gaining more positions, as is the eurozone's weak fundamentals. However, the prospect of canceling quarantine will clearly keep the market positive. The restraining factor for the euro's growth is still the risk of extending quarantine measures in February this year. The COT report indicated that long non-commercial positions rose from 228,757 to 236,533, while short non-commercial positions only increased from 72,867 to 73,067. Due to the sharp rise in long positions, the total non-commercial net position increased to 163,466 against 155,890 a week earlier.
Euro buyers will focus on protecting support at 1.2138, since a lot depends on this level. Forming a false breakout there will be a signal to open long positions in sustaining the upward trend, and the bulls will initially aim for resistance at 1.2187, which we did not reach yesterday. A breakout and consolidation above this range will certainly lead to a more active growth for EUR/USD in order for it to reach a high of 1.2220, where I recommend taking profits. You need to understand that the breakout of 1.2138 and being able to settle below this level will completely cancel out the upward trend of the euro, which has been observed since January 18 this year. Therefore, in case there is no activity around 1.2138, it is best to postpone long positions until the low of 1.2098 has been tested, from which 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:
Important fundamental reports will not be released today, so the bears will focus on the 1.2138 level. A breakout and being able to test this level from the bottom up (similar to yesterday's sale, which I analyzed above, and highlighted the entry point on the chart) creates an excellent signal to open short positions in hopes of a larger downward correction to the support level of 1.2098. But before counting on a major decline, it is necessary to achieve a breakout and reach the lower border of the rising channel, which is located below the 1.2138 level. The bears are still aiming for the January 18 low at 1.2055. An important task for the bears is to maintain control over the 1.2187 level. If the pair grows during the European session, forming a false breakout there will become an entry point to short positions in hopes of a downward correction. In case EUR/USD grows above the resistance of 1.2187, it is better not to rush to sell. I recommend waiting for an update of the 1.2220 area and afterwards you can open short positions from there immediately on a rebound, counting on a downward correction of 20-25 points within the day.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates an attempt by the bears to maintain pressure on the euro.
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 1.2165 level will lead to a new wave of euro growth. A breakout of the lower border of the indicator in the 1.2125 area will increase the 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.
