To open long positions on EURUSD, you need to:
In the first half of the day, I focused on the data on the manufacturing activity of the eurozone countries and expected the euro to continue to recover with good reports. However, despite the excellent data, the market behaved quite differently. On the 5-minute chart, I marked the entry point to short positions. It can be seen how the bears achieve a breakdown of the level of 1.2099 and consolidate below. An unsuccessful return to this range led to the formation of a signal to open short positions in the continuation of the downward trend. At the time of writing, the pair went down from the entry point of about 30 points, which allows you to drag the stop loss to no loss.
Given the market reaction to the data on the eurozone, it is difficult to imagine how the market will behave after similar data on the US economy. Following the market logic, good data on the US, on the contrary, will lead to the strengthening of the euro. Therefore, the bulls will focus on the level of 1.2099 during the American session. A return and consolidation above this range with a test of it from top to bottom forms an additional signal for entering the market in the expectation of recovery of EUR/USD to the morning resistance of 1.2136, where I recommend taking the profits. In the event of a further fall in the euro, the formation of a false breakout in the support area of 1.2060 will lead to the formation of a good entry point. Otherwise, I recommend postponing long positions until the test of the minimum of 1.2026, from which you can open long positions immediately for a rebound in the expectation of an upward correction of 20-25 points within the day.
To open short positions on EURUSD, you need to:
Sellers have fully managed to fulfill the task set for them, and now, during the American session, they will seek to update the support of 1.2060. While trading is conducted below this range, we can count on a further fall of the pair with the release of new annual lows in the area of 1.2026, where I recommend taking the profits. It should be remembered that in the second half of the day we have data on the US economy, in particular on the activity of the ISM manufacturing index, which may lead to a larger spike in volatility. In the case of recovery of EUR/USD back to the resistance area of 1.2099, the formation of a false breakout after the US reports will form a good entry point into short positions. In the scenario of a lack of sellers' activity at this level, it is best to postpone sales for a rebound until the resistance update of 1.2136, in the expectation of a downward correction of 15-20 points within the day. There are also moving averages that play on the side of euro sellers.
Let me remind you that the COT report (Commitment of Traders) 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 continuation of several quarantine restrictions until February this year in many European countries, buyers of risky assets continue to believe in a bullish trend. Especially the demand appears at each significant downward correction from the highs of this year, which allows new major players to enter the market. Vaccination disruptions in Europe are preventing buyers of risky assets from building up their positions more actively, as are weak eurozone fundamentals. However, the prospect of lifting the quarantine will keep the market positive. The risk of extending the quarantine measures in February of this year is still a deterrent to the growth of the euro. The COT report shows that long non-profit positions increased from the level of 228,757 to the level of 236,533, while short non-profit positions increased only from the level of 72,867 to the level of 73,067. Due to the sharp increase in long positions, the total non-commercial net position rose to 163,466 from 155,890 a week earlier.
Signals of indicators:
Moving averages
Trading is below 30 and 50 daily moving averages, which indicates a fall in the euro in the short term.
Note: The period and prices of the moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
In the case of growth of the pair, the upper limit of the indicator in the area of 1.2155 will act as a resistance.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit 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 the short and long positions of non-commercial traders.
