To open long positions on EUR/USD, you need:
Only one signal to enter the market appeared yesterday. Let's take a look at the 5-minute chart and talk about what happened: you can clearly see how the bears failed to fall below support at 1.1877, after which a false breakout of this level was formed. Even if this range was repeatedly tested, there was no willingness to sell the euro, which resulted in the closure of short positions and then the pair strengthened in the morning. As a result, the 1.1933 target level was reached, which made it possible to take around 50 points of profit from the market. Nothing interesting happened in the resistance area of 1.1933 in the afternoon. Although Federal Reserve Chairman Jerome Powell's speech supported buyers of risky assets, it was not possible to form a normal entry point from the 1.1933 level.
Before talking about the prospects for the EUR/USD movement, let's see what happened in the futures market and how the Commitment of Traders (COT) positions changed. The COT report for March 15 clearly shows how the sharp reduction of long positions is taking place, however, the growth of those who want to sell the euro is gradually slowing down. Despite this, the market remains on the side of the sellers of risky assets, which may lead to forming a downward trend. This is confirmed by the graph of the euro's decline, which we have been observing since the end of February this year. The sharp rise in US 10-year bond yields favors the dollar as investors expect America to be the first to start raising interest rates, making the greenback more attractive. The recent Fed meeting has once again convinced investors that the US economy is recovering much faster than expected, increasing the risk of an earlier inflationary jump. At the moment, it is best not to rush into euro purchases, but to wait for lower prices. Another factor in the medium-term pressure on the euro is the rise in the incidence of coronavirus in the eurozone countries and the weak vaccination program. The problems with the Astrazeneca vaccine do not add confidence to investors, who are betting on a stronger summer growth rate for the EU economy. One can expect an improvement in the economic outlook for the eurozone only when restrictions are lifted and the service sector is restored, which will return the medium-term trend of strengthening EUR/USD. The COT report indicated that long non-commercial positions fell from 207,588 to 195,857, while short non-commercial positions only rose from 105,624 to 105,881. As a result, the total non-commercial net position fell from 101,964 to 89,976 for the fifth consecutive week. The weekly closing price was 1.1926 against 1.1812 a week earlier.
Nothing has changed from a technical point of view, as the bulls failed to rise above resistance at 1.1939, which coincides with the middle border of the horizontal channel. Important fundamental reports will not be released in the first half of the day, therefore, we can talk about bulls regaining control of the market after the breakthrough and downward test of the 1.1939 level. A good signal can only be generated from this area, for the purpose of restoring the bull market. In this scenario, it will be possible to count on a larger increase in EUR/USD with a return to last week's high in the 1.1987 area, where I recommend taking profit. If the bulls are not that active in the 1.1939 area, or the euro is under pressure in the first half of the day, then it would be best to postpone long positions until a bigger support like 1.1877 has been tested, from which you can buy the euro immediately on a rebound in the expectation of an upward correction of 20-25 points within the day. The next major level is seen in the 1.1835 area.
To open short positions on EUR/USD, you need:
The euro will remain under pressure as long as trading is below 1.1939. Forming a false breakout at this level creates a good entry point for short positions and will return pressure to the pair. In this case, the nearest target will be support at 1.1877, where I recommend taking profits. The next major level is seen in the 1.1835 area, where it will also be possible to observe how bulls are active. If the euro is rising and traders are not that active around 1.1939, then it would be best to postpone selling until a larger resistance at 1.1987 has been tested, from which you can sell EUR/USD immediately on a rebound, counting on a downward correction of 25-30 points within the day. The next major level is seen only around 1.2047.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates the buyers' attempts to regain control of the market.
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
If the euro grows in the first half of the day, the upper border of the indicator in the area of 1.1950 will act as a resistance. In case the pair falls, support will be provided by the lower border around 1.1900.
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.
