To open long positions on EURUSD, you need to:
Judging by the data released today for the EU countries, in particular for Germany, the recent statements of Christine Lagarde on the topic that the eurozone economy will survive the second wave of coronavirus better than the first make real sense. In the first half of the day, no signals were formed to enter the market, as the pair did not reach any of the previously indicated levels. In this regard, the technical picture and trading recommendations remained unchanged for the second half of the day.
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Low volatility remains, so euro buyers will continue to focus on protecting the support of 1.2091, on which the further upward correction of the pair depends. The focus will shift to the fundamental data on the US economy, which may lead to a decline in EUR/USD to the support area of 1.2091. The formation of a false breakout forms a good entry point to long positions. Given that the pair is now gradually approaching the resistance of 1.2136, the bulls will try to focus on this level in the afternoon. A break and consolidation above with a top-down test will form a good signal to buy the euro to reach a weekly maximum in the area of 1.2175, where I recommend taking the profits. In the scenario of a decline in the euro and the absence of bull activity in the support area of 1.2091, it is better not to rush to buy, and wait for the update of the minimum of 1.2055, which coincides with the minimum of this year. From there, you can buy the euro immediately on the rebound with the expectation of an upward correction of 15-20 points within the day.
To open short positions on EURUSD, you need to:
Sellers today failed to push the euro to the support level of 1.2091, so the focus in the second half of the day will shift to the resistance of 1.2136, where the pair is now gradually recovering. The formation of a false breakout with good fundamental statistics on the US economy forms a signal to open short positions with a repeated goal of returning to the support area of 1.2091. A break and a test of this level from the bottom up will form a new entry point into short positions in the continuation of the downward correction, which will push EUR/USD lower to the minimum of the year in the area of 1.2055, where I recommend fixing the profit. If in the second half of the day we will observe the upward correction of the euro further, and the bears will not show any activity in the resistance area of 1.2136, then it is best to postpone short positions until the test of the maximum of 1.2175, from where you can sell EUR/USD immediately on a rebound to reduce by 15-20 points within the day.
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 conducted above 30 and 50 daily moving averages, which indicates the sideways nature of the market 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
A break of the upper limit of the indicator in the area of 1.2136 will lead to a new wave of growth of the euro. In the case of a decline in the pair, the lower border in the area of 1.2091 will provide support.
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.
