To open long positions on EUR/USD, you need:
Last Friday, there was only one signal to enter the market. Let's take a look at the 5 minute chart and break down the trade. Since important fundamental reports were not available in the morning, the bulls tried to rise above resistance at 1.1939, before the test of which exactly 1 point was not enough. I was ready to open short positions when a false breakout was formed there. Therefore, I was forced to miss the entire downward movement, which was then observed until the support area of 1.1884. But one could look for an entry into long positions from support at 1.1884. A false breakout at this level, which occurred during the US session, led to forming a buy signal. The reverse test of the 1.1884 level created an excellent entry point, which led to an upward correction by 25 points.
There are no important fundamental statistics today, but Federal Reserve Chairman Jerome Powell will speak this afternoon. It is unlikely that his statements will somehow affect the market, which, judging by the bearish gap, is heading back to the area of the 18th figure. Bulls will have to protect the important support level of 1.1877, which coincides with last Friday's low. It is also the lower border of the current horizontal channel. Forming a false breakout there will result in creating a signal to open long positions in hopes that the euro will recover to the resistance area of 1.1933, where the moving averages pass, playing on the side of the sellers. A breakthrough and consolidation above 1.1933 (the middle of the horizontal channel) will open a direct road to the high of 1.1987, where I recommend taking profits. If bulls are not active in the support area at 1.1877, and most likely the bearish trend will continue, then I recommend holding back from long positions for a rebound at once, then a larger low of 1.1835, counting on an upward correction of 20-25 points within the day. Being able to test this level will completely cancel out all the bulls' plans for the euro's rapid growth.
To open short positions on EUR/USD, you need:
The bears need to think of a way to fall below support at 1.1877. A breakout and consolidation below this level will quickly push EUR/USD to the 1.1835 low, where I recommend taking profits. The next larger target will be the low of 1.1793, which is quite possible for the pair to reach by the middle of the week. Everything will depend on Powell's statements today and the yield of US bonds, which at the end of last week rose to new annual highs. If EUR/USD grows in the first half of the day, then it would be best to wait for a false breakout to form at the 1.1933 level, and only then should you open short positions. Moving averages also pass there. If the bears are not that active near resistance at 1.1933, and the bulls manage to achieve a breakthrough and rise above this level, then it would be best to open short positions immediately on the rebound from the next large resistance at 1.1987, 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 carried out below 30 and 50 moving averages, which indicates that the euro will continue to fall 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 lower border of the indicator in the 1.1877 area will lead to a larger downward movement for the euro. The breakout of the upper border in the area of 1.1933 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.
