To open long positions on EUR/USD, you need:
The bears tried to surpass the 1.2110 level last Friday morning, and it would seem that they succeeded. Let's take a look at the 5-minute chart and talk about what happened and how to proceed. You can clearly see how the bears are trying to settle below 1.2110 and test this level from the bottom up, which creates a signal to open short positions. However, this did not cause the pair to sharply fall, since after several unsuccessful attempts to move down, the bulls took control of the 1.2110 level, and disappointing data on the US economy weakened the US dollar even more. Wait for a signal to buy the euro from the 1.2110 level, since after its return the reverse test did not take place.
From a technical point of view, nothing has changed and the pair continued to trade in a narrow horizontal channel, in which it was in for the entirety of last week. Reports on changes in the volume of industrial production in the euro zone and the balance of foreign trade will be released today. However, these data are unlikely to put pressure on the market, as they refer to December last year and are no longer significant for the intraday market. Also, the Eurogroup is expected to meet today, at which issues of vaccination of the eurozone and its future prospects will be discussed. The United States will celebrate Presidents' Day, so volatility will likely be quite low. If EUR/USD rises in the first half of the day, buyers will be focused on getting the pair to settle above the resistance of 1.2149. Testing this area from top to bottom creates an excellent signal to open long positions in euros in order to rise to a high of 1.2187, where I recommend taking profits. Bulls will still aim for resistance at 1.2220. The euro might be under pressure if buyers are not active during the European session. In this case, bulls will need to focus on protecting support at 1.2110, just above which the moving averages pass. Forming a false breakout in that area creates a good entry point into long positions in hopes to sustain the upward trend. If buyers are not active at this level, I recommend holding back from long positions until the low of 1.2069 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 against the upward trend this morning, in the event of a false breakout in the resistance area of 1.2149, which creates a signal to sell the euro. Returning to the area below 1.2149 and testing it from the bottom up (similar to Friday sale, which I mentioned above) creates a convenient point to enter the market. There is no need to rely on eurozone fundamental reports, since even their discrepancy with forecasts will not affect the market and its future prospects. An equally important task for sellers is to return EUR/USD to the support area of 1.2110, the pair's succeeding direction depends on whether the pair surpasses it or not. A breakout and testing 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 1.2069 level, where I recommend taking profits. The 1.2035 area will be a distant target. If we continue to observe an upward trend from the euro in the first half of the day, and bears are not active in the resistance area of 1.2149, then it is best to hold back from short positions until a new high at 1.2187 has been tested, from where you can sell EUR/USD immediately on a rebound in order to pull down the pair 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 slightly above 30 and 50 moving averages, but the market remains sideways.
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 1.2137 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 1.2095 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.
