To open long positions on EUR/USD, you need:
I paid attention to the 1.2087 level in my morning forecast and advised you to make decisions on entering the market. On the 5 minute chart, I have highlighted the area where the level was surpassed, however, to move into long positions, the reverse test of 1.2087 did not take place in the first half of the day and everything had to be shifted to the US session. Closer to the middle of trading, the bears made several unsuccessful attempts to break through support at 1.2087, which led to creating a signal to open long positions in sustaining the upward trend. As a result, the movement was more than 30 points. However, it was only possible to wait for the 1.2129 target level to be tested in today;s Asian session.
Important data on inflation in Germany will be released this morning. Recently, German reports have been helping the euro rise, so the emphasis should be placed on this indicator. There will be similar data on the US economy in the afternoon, but we will talk about them later. Also do not forget about the speech of European Central Bank President Christine Lagarde. Euro buyers will focus on the breakout and consolidation above the resistance of 1.2129. Testing this level from top to bottom (similar to yesterday's purchase, which I analyzed above) creates an excellent signal to open long positions in the euro in order to push it to a high of 1.2175, where I recommend taking profits. Resistance at 1.2220 will still be a target. If we receive a disappointing report on the European economy during the European session, as well as a downward correction in EUR/USD, then buyers will need to focus on protecting the support at 1.2087, where the moving averages pass, playing on the side of the bulls. Forming a false breakout there creates a good entry point into long positions, counting on sustaining the pair's upward correction. If buyers are not active at this level, I recommend holding back from long positions until the low of 1.2047 has been tested, from where you can buy the euro immediately on a rebound, counting on an upward correction by 20-25 points within the day.
To open short positions on EUR/USD, you need:
I recommend opening short positions this morning against the upward trend, but only in case a false breakout forms in the resistance area of 1.2129, which will generate a signal to sell the euro. Weak data on the euro area and Lagarde's speech on the topic of a slower recovery of the European economy will likely weigh on EUR/USD during morning trading. This will allow the bears to return EUR/USD to the support area of 1.2087, as the pair's succeeding direction depends on whether the price will surpass this level. A breakout and being able to test this level from the bottom up will create a new entry point for short positions, which will push EUR/USD to a low in the area of 1.2047, where I recommend taking profits. The 1.2003 level will be a succeeding target. If we continue to observe an upward trend from the euro in the first half of the day, and the bears are not active in the resistance area of 1.2129, then it is best to postpone short positions until a new high at 1.2175 has been tested, from where you can sell EUR/USD immediately on a rebound in order to pull it down by 20-25 points within the day. The next major resistance is seen around 1.2220.
The Commitment of Traders (COT) report for February 2 revealed a sharp rise in short positions and a reduction in long positions, which reflects the pair's downward correction in late January and early February this year. Weak fundamentals for the eurozone economy and lower economic estimates from the European Central Bank limit the euro's growth potential, so does the fact that vaccinations in the eurozone will proceed at a slower pace than expected. All of this will lead to a double recession in the European economy in early 2021, but it is unlikely to seriously affect the medium-term prospects for the EUR/USD recovery. Therefore, with each significant downward correction, the demand for the euro will only increase, and the lower the rate, the more attractive it will be for investors. The prospect of canceling quarantine will clearly keep the market positive in the future. The COT report indicated that long non-commercial positions fell from 238,099 to 216,887, while short non-commercial positions rose from 72,755 to 79,884. Due to the sharp decline in long positions, the total non-commercial net position fell to 137,003 against 165,344 a week earlier. The weekly closing price was 1.2067 against 1.2142.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates continued growth in the euro in the short term.
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 level of the indicator in the 1.2129 area will lead to a new wave of euro growth. In case the pair falls, support will be provided by the lower border of the indicator in the 1.2087 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.
