To open long positions on EURUSD, you need to:
In the first half of the day, one signal was formed to enter the market. Let's look at the 5-minute chart and talk about what happened. It is clearly seen that after the breakdown of the support at 1.2060, the euro is falling rather rapidly, although the data on the eurozone GDP for the 4th quarter turned out to be much better than the economists' forecasts. We had a similar situation yesterday after the data on manufacturing activity, which came out better than expected, and the euro fell. However, it was not possible to open short positions in the area of 1.2060, as the reverse test of this level did not take place. A good entry point for long positions was the level of 1.2026, from which I recommended buying the euro in my morning forecast. As a result, at the time of writing, the correction was about 25 points, which was expected.
The goal of the bulls during the US session will be to return the resistance of 1.2060, which they missed in the first half of the day. A return and consolidation above this range with a test of it from top to bottom forms an additional signal to enter the market in the expectation of recovery of EUR/USD to the maximum of 1.2099, which was not reached today in the first half of the day. In the case of a further fall in the euro, the formation of a false breakdown in the support area of 1.2026 will produce a good entry point, so as to rebound this level, the bulls played. Otherwise, I recommend postponing long positions until the test of the minimum of 1.1986, from which you can open long positions immediately for a rebound in the expectation of an upward correction of 20-25 points within the day.
To open short positions on EURUSD, you need to:
The sellers were able to fully fulfill the task assigned to them, but unfortunately, they could not wait for a convenient entry point. In the second half of the day, the bears will try to maintain control over the level of 1.2060, and the next formation of a false breakdown will form a signal to sell the euro in the continuation of the bear market. The initial target will be to break the low of 1.2026, from which the pair rebounded today during the European session. A break and consolidation below 1.2026 with a test of it from the bottom up forms another signal to sell the euro with an exit to the support of 1.1986, where I recommend fixing the profits. We need to remember that in the second half of the day we do not have important fundamental statistics, so the pressure on the euro will be limited. In the case of recovery of EUR/USD back to the resistance area of 1.2060 and the absence of sellers' activity at this level, it is best to postpone sales for a rebound until the resistance update of 1.2099, in the expectation of a downward correction of 15-20 points within the day. There are also moving averages that play on the side of euro sellers.
Let me remind you that the COT report (Commitment of Traders) for January 26 recorded a sharp increase in long positions and a reduction in short ones. The incoming data limits the upward potential of the euro, as does the fact that vaccination in the euro area will take place at a slower pace than expected. This is sure to affect GDP for the 1st quarter of this year, however, it is unlikely to seriously affect the medium-term prospects for the recovery of EUR/USD. With each significant downward correction of the pair, the demand for the euro returns, and the lower the exchange rate, the more attractive it will become for investors. The prospect of lifting the quarantine will clearly keep the market positive in the future. However, 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 236,533 to the level of 238,099, while short non-profit positions decreased from 73,067 to the level of 72,755. Due to the continued growth of long positions, the total non-commercial net position rose to 165,344 from 163,466 a week earlier.
Signals of indicators:
Moving averages
Trading is below 30 and 50 daily moving averages, which indicates a fall in the euro 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
If the pair grows, the upper limit of the indicator around 1.2099 will act as a resistance.
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.
