To open long positions on EUR/USD, you need:
The data on inflation in the US did not greatly affect the balance of power in the market, as it fully coincided with economists' forecasts. This enabled buyers of the euro to maintain their advantage and continue the upward correction of the pair. Let's take a look at the 5-minute chart and figure out what happened: you can clearly see how, after the US report was published, a false breakout to the 1.1905 level was formed and the price returned to the area under this range. All this resulted in forming a signal for opening short positions, which was never realized. After some time, there was a breakthrough and so the pair rose above the 1.1905 level. A reverse test from above, which took place a little later, did not lead to forming a signal to buy the euro, since at the very first candlestick in this area was broken, which pushed the euro below this range. Considering two incorrect signals, I conclude that the level was simply incorrectly determined. Therefore, I made the decision to return to the levels that I had at the beginning of the week.
The technical picture has slightly changed compared to yesterday. Buyers need to think about a breakthrough and settle above the resistance of 1.1943. Testing of this level from top to bottom in the first half of the day creates a signal for you to open long positions in order to continue the bullish correction. However, much will depend on the European Central Bank's decision on monetary policy. If the ECB increases the bond purchase program, this could strengthen the euro, since it will significantly affect the yield of bonds, which has recently been very much preventing the euro from returning to the upward track. The bulls's main goal is to surpass 1.1942 and return to the resistance area of 1.1998. A breakout and being able to test this level from top to bottom creates another buy signal for the purpose of rising to a high like 1.2047, where I recommend taking profits. In case the pair falls in the first half of the day before the ECB's decision, then it would be best to pay attention to support at 1.1891. However, you can open long positions from there only if a false breakout is formed there. I recommend buying EUR/USD immediately on a rebound from a larger low like 1.1838, which practically coincides with this month's low. There you can count on an upward correction of 25-30 points within the day.
To open short positions on EUR/USD, you need:
The initial task is to protect resistance at 1.1943. Forming a false breakout there creates a signal for you to open short positions in hopes of pulling down the pair to a support like 1.1891, where the moving averages pass, playing on the side of buyers. It will be possible to talk about a possible breakthrough and consolidation below 1.1891 only after the ECB announces its decision on monetary policy and on condition that the central bank leaves it unchanged. In this case, a breakthrough and reverse test of 1.1891 from the bottom upwards creates a new sell signal for the purpose of pulling it down to this month's low, to the 1.1838 area, which is where I recommend taking profit. If the euro grows above the resistance of 1.1943, then I recommend opening short positions immediately on a rebound from a new high of 1.1998, counting on a downward correction of 25-30 points within the day. The next major resistance is seen around 1.2047.
The Commitment of Traders (COT) report for March 2 revealed a sharp decline in long positions and a very large increase in short positions, which indicates a clear shift in the market towards sellers of risky assets. This is confirmed by the graph of the euro decline, which we have been observing for the third week. This time, it was not possible to quickly win back the next large decline in the pair. The sharp rise in bond yields in many developed countries continues, which plays in the favor of the dollar, as investors expect the United States to be the first to start raising interest rates, which makes the greenback more attractive. The recent approval by the US Senate of a new bailout package and a $1,400 payment to all Americans affected by the pandemic makes risky assets even less attractive. Therefore, it is better not to rush to buy euros, but to wait for lower prices. A good advantage for the euro will be the moment when the active curtailment of quarantine and isolation measures begins in European countries: Germany has already announced its plan in this direction, but it has not yet come to the point. It is also necessary to wait for the moment when the service sector will start working in full force again, which will lead to an improved economic outlook and also strengthen the EUR/USD pair. The COT report indicated that long non-commercial positions declined from 228,501 to 222,655, while short non-commercial positions rose from 90,136 to 96,667. As a result, the total non-commercial net position declined again for the third consecutive week, from 138,365 to 125,988. The weekly closing price was 1.2048 against 1.2164 a week earlier.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates that the upward correction will continue for the pair.
Note: The period and prices of moving averages are considered by the author on the H1 chart and differs from the general definition of the classic daily moving averages on the D1 daily chart.
Bollinger Bands
A breakout of the upper border of the indicator in the 1.1905 area will lead to a new wave of euro growth. A breakout of the lower border of the indicator in the area of 1.1882 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.
