To open long positions on EUR/USD, you need:
Buyers tried their best to keep the market under their control, but another round of growth in Treasury bond yields sharply weighed on the euro. I paid attention to two important levels in yesterday's morning forecast: resistance at 1.1989 and support at 1.1939. Let's take a look at the 5 minute chart and talk about what happened there. To my regret, it slightly fell short before a false breakout formed in the resistance area of 1.1989, which buyers approached very closely in the first half of the day. Therefore, I was forced to skip the downward movement that happened later. A false breakout of the 1.1939 level resulted in creating a signal to buy the euro, however, there was no rapid large growth from this level. Another false breakout was formed during the US session: it became a confirmation of a signal to buy the euro, but the bulls, despite weak reports on the US labor market, did not have enough strength to return the pair to morning highs. As a result: we saw the euro fall beyond 1.1939 and even further. A reverse test of this range in the afternoon creates a fairly convenient entry point for short positions, which is clearly visible on the chart.
No important fundamental reports or speeches by representatives of world central banks today, so the emphasis is purely on technical analysis and reaching the nearest support and resistance levels. The bulls' primary task is to break through and regain control of resistance at 1.1939, where the moving averages pass, playing on the sellers' side of the euro. Testing this level from the bottom up, along with good data on German producer prices for February, creates a convenient entry point into long positions in hopes that EUR/USD would rise to a high like 1.1989, where I recommend taking profit. The next big resistance is seen around 1.2047, but it won't be easy to get to, especially with another rise in US bond yields. With a downward correction in the first half of the day, you can open long positions after a false breakout forms in the 1.1884 area, where the lower border of the current horizontal channel also passes. If buyers are not active, then I recommend postponing long positions for a rebound, then a larger low like 1.1838, counting on an upward correction of 20-25 points within the day. Testing this level will completely cancel out all the bulls' plans regarding the euro's rapid growth
To open short positions on EUR/USD, you need:
The bears need to think of a way to defend resistance at 1.1939, which is where the moving averages that play on their side are. Forming a false breakout at this level will be an excellent signal to open short positions in order to pull down EUR/USD to the area of the lower border of the horizontal channel at 1.1884. The euro will likely be under pressure, considering that important fundamental reports will not be released today. A breakthrough and consolidation below 1.1884 will quickly push EUR/USD to the 1.1838 low, where I recommend taking profits. If bears are not that active near resistance at 1.1939, and the bulls manage to break through and rise above this area, then it would be best to open short positions immediately on a rebound from the next large resistance at 1.1989, counting on a downward correction of 20-25 points within the day. The next major high is clearly visible in the 1.2047 area.
The Commitment of Traders (COT) report for March 9 clearly shows a sharp decline in long positions and a very large increase in short positions, which indicates a continued shift in the market towards sellers of risky assets. This is confirmed by the euro's decline, which we have seen since the end of February. Bond yields in many developed countries continue to sharply rise, which plays in 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 European Central Bank's recent meeting did not change the market, as the decisions made were not critical and did not affect investor sentiment in any way. It is best not to rush into euro purchases, but to wait for lower prices. The growth in the incidence of coronavirus is another factor of medium-term pressure on the euro. The slow vaccination program for the population is pushing the cancellation of quarantine measures to a later date. We can only expect an improvement in the economic outlook for the eurozone once restrictions are lifted and the service sector is restored, which will return the medium-term trend to strengthening EUR/USD. The COT report indicated that long non-commercial positions declined from 222,655 to 207,588, while short non-commercial positions rose from 96,667 to 105,624. As a result, the total non-commercial net position declined again for the fourth consecutive week, from 125,988 to 101,964. The weekly closing price was 1.1812 against 1.2048 a week earlier.
Indicator signals:
Moving averages
Trading is underway below 30 and 50 moving averages, which indicates the bears attempt to resume the downward trend.
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 lower border of the indicator in the 1.1900 area will lead to a larger downward movement for the euro. The breakout of the upper border in the 1.1939 area will strengthen the euro's growth.
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.
