To open long positions on EUR/USD, you need:
Last Friday, the euro sharply rose against the dollar following the US labor market report. Let's take a look at the chart and talk about why this happened. On the 5-minute chart, I have highlighted the long entry point from the 1.1997 level. The breakout and consolidation above this range after the data on the US labor market created a good entry point to buy EUR/USD. The euro grew even against the background of good indicators, as many large traders took advantage of this moment and took profits in long positions in the US dollar. The upward movement was about 40 points.
This morning you can watch the reports on the indicator of consumer confidence in the euro area, as well as data on changes in industrial production in Germany. These indicators are unlikely to affect the market, so euro buyers will focus on the breakout and consolidation above the resistance of 1.2047. Testing this level from top to bottom creates an excellent signal to buy the euro for the purpose of pushing the euro to a high of 1.2087, where I recommend taking profits. The bulls are still aiming for a high of 1.2129. If we see a downward correction in EUR/USD during the European session, then buyers will need to concentrate on protecting support for 1.2003, where the moving averages are, playing on the side of the bulls. Forming a false breakout in that area creates a good entry point into long positions, counting on continuing the pair's upward correction. If buyers are not active at this level, I recommend postponing long positions until the year's low in the 1.1952 area has been tested, from where you can buy the euro immediately on a rebound, counting on an upward correction by 20-25 points within the day.
To open short positions on EUR/USD, you need:
I recommend opening short positions against the upward trend this morning only in case of a false breakout in the resistance area of 1.2047, which will generate a signal to sell the euro. Weak data on the euro area and the speech of European Central Bank President Christine Lagarde on the slower recovery of the European economy are likely to put pressure on EUR/USD during morning trading. This will make it possible for the bears to return EUR/USD to the support area of 1.2003, as the pair's succeeding direction depends on its breakdown. A breakout and being able to test this level from the bottom up will create a new entry point for short positions, which will pull down EUR/USD to the annual low in the 1.1952 area, where I recommend taking profit. If we continue to observe the upward correction of the euro in the first half of the day, and the bears are not active in the resistance area of 1.2047, then it is best to postpone short positions until the 1.2087 high has been tested, from where you can sell EUR/USD immediately on a rebound in order to 20-25 points within a day.
The Commitment of Traders (COT) report for January 26 recorded a sharp increase in long positions and a reduction in short ones. The incoming data is limiting the euro's upward potential, as is the fact that vaccinations in the euro area will proceed at a slower pace than expected. This will certainly affect the GDP for the first quarter of 2021, but it is unlikely to be able to seriously affect the medium-term prospects for the EUR/USD recovery. With each significant downward correction in the pair, the demand for the euro returns, and the lower the rate, the more attractive it will become for investors. The prospect of canceling quarantine will clearly keep the market upbeat in the future. However, the risk of extending quarantine measures in February is still a restraining factor for euro growth. The COT report indicated that long non-commercial positions rose from 236,533 to 238,099, while short non-commercial positions fell from 73,067 to 72,755. Due to continued growth in long positions, the total non-commercial net position rose to 165,344 against 163,466 a week earlier.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates the euro's succeeding growth 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 D1 daily chart.
Bollinger Bands
Growth will be limited by the upper level of the indicator in the 1.2075 area. In case the pair falls, support will be provided by the lower border of the indicator around 1.1980, from which you can buy the euro immediately on a rebound.
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.
