To open long positions on EUR/USD, you need:
A false breakout in the 1.2104 level in the first half of the day created a good entry point for short positions, however, having lost 15 points, the downward movement of the euro stalled. Then the bulls tried to seize the initiative again and surpassed 1.2104, forming a certain base on it in order to form an upward correction and, accordingly, a signal to buy the euro. However, it was not implemented either. An upward movement by 15 points and a retracement to the 1.2104 area. A signal for entering long positions appeared in the afternoon, after the euro grew and the pair settled above 1.2126. Growth from this level reached around 15 points.
Buyers of the euro will focus on protecting support at 1.2091, on which the succeeding upward correction of the pair depends. Good fundamental data on the eurozone, of which a large number is expected today, will allow a false breakout to form in the support area of 1.2091, which will create a good entry point into long positions. In this scenario, the initial target of buyers will be resistance at 1.2136. A breakout and being able to settle at this level along with a downward test will certainly create a good signal to buy the euro in order to reach the weekly high of 1.2175, where I recommend taking profit. We can hardly expect a larger upward trend since volatility has been low throughout the week. In case the bulls are not active in the support area of 1.2091, it is better not to rush into long positions, but to wait for an update of the low of 1.2055, which coincides with this year's low. You can buy the pound at that level immediately on a rebound, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
Sellers of the euro will do everything to settle below support at 1.2091. Being able to test this level from the bottom up creates an excellent entry point into short positions in sustaining the downward correction, which was observed in today's Asian session. Disappointing GDP data for France and Germany will only increase the pressure on the pair, pushing it lower to this year's low at 1.2055. I recommend taking profit there. We can only expect to surpass this level if we receive good reports on the US economy, which will open a direct road to the low of 1.2026. If we observe an upward correction of the euro in the first half of the day, then we can consider short positions after forming a false breakout in the resistance area of 1.2136. I recommend selling the euro immediately on a rebound from the high of 1.2175 for the purpose of pulling it down by 15-20 points within the day.
The Commitment of Traders (COT) report for January 19 showed a sharp increase in long positions and a slight increase in short ones. Most buyers of risk assets believe in the bullish trend despite all fundamental data and restrictive measures in most European countries, which may last until February. Demand for risk assets advances amid a significant downward correction from the highs of this year. This allows new big players to enter the market. Problems with vaccination in Europe and weak fundamental data prevent buyers of risk assets from increasing the volume of trades. However, market participants remain positive amid a possible lifting of lockdown measures. The euro's rally is also halted by a risk that the EU authorities may prolong the quarantine in February. 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.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates market uncertainty regarding the 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 break of the lower border at 1.2091 will increase pressure on the euro. Growth will be limited by the upper level of the indicator around 1.2136.
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.
