To open long positions on EUR/USD, you need:
Yesterday, I did not wait for a normal signal for entering the market, since volatility is very low and it is quite difficult to trade. Let's take a look at the 5-minute chart and talk about what happened. Restoring yesterday's weekly high after going beyond the 1.2139 level confused all the cards. Selling on a bull market was a rather risky business in this case, and returning to the 1.2139 level did not lead to forming a convenient entry point for short positions.
Important fundamental data will not be released in the morning, so it is possible that the pair will continue to trade in a horizontal channel. The fact that the bulls failed to surpass yesterday's new high has kept the market on their side, but bears are still hoping to surpass support at 1.2110. By the way, the levels have slightly changed, but the general concept for trading remains the same. If EUR/USD grows in the first half of the day, buyers will be focused on a breakout and consolidation above the resistance of 1.2149. Testing this area from top to bottom creates an excellent signal to open long positions in euros as we aim to rise to a high of 1.2187, where I recommend taking profits. Resistance at 1.2220 is still a target. The euro might be under pressure if buyers are not active during the European session. In this case, the bulls will need to focus on protecting support at 1.2110, just above which the moving averages pass. Forming a false breakout in that area creates a good entry point into long positions as we expect to continue the upward trend. If buyers are not active at this level, I recommend postponing long positions until a low like 1.2069 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, but only in case a false breakout forms in the resistance area of 1.2149, which will generate a signal to sell the euro. Returning to the area below 1.2149 and being able to test it from the bottom up creates a convenient point for entering the market. There is no need to rely on eurozone fundamental reports since they are not available today. An equally important task for sellers will be to return EUR/USD to the support area of 1.2110, as the pair's succeeding direction depends on whether the price will be able to surpass this level. A breakout and being able to test this level from the bottom up will create a new entry point for short positions, which will push EUR/USD to a low in the area of 1.2069, where I recommend taking profits. The 1.2035 level will be a succeeding target. If we continue to observe an upward trend from the euro in the first half of the day, and the bears are not active in the resistance area of 1.2149, then it is best to postpone short positions until a new high at 1.2187 has been tested, from where you can sell EUR/USD immediately on a rebound in order to pull it down by 20-25 points within the day. The next major resistance is seen around 1.2220.
The Commitment of Traders (COT) report for February 2 revealed a sharp rise in short positions and a reduction in long positions, which reflects the pair's downward correction in late January and early February this year. Weak fundamentals for the eurozone economy and lower economic estimates from the European Central Bank limit the euro's growth potential, so does the fact that vaccinations in the eurozone will proceed at a slower pace than expected. All of this will lead to a double recession in the European economy in early 2021, but it is unlikely to seriously affect the medium-term prospects for the EUR/USD recovery. Therefore, with each significant downward correction, the demand for the euro will only increase, and the lower the rate, the more attractive it will be for investors. The prospect of canceling quarantine will clearly keep the market positive in the future. The COT report indicated that long non-commercial positions fell from 238,099 to 216,887, while short non-commercial positions rose from 72,755 to 79,884. Due to the sharp decline in long positions, the total non-commercial net position fell to 137,003 against 165,344 a week earlier. The weekly closing price was 1.2067 against 1.2142.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the market, or forming a downward correction.
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
Volatility is very low, which does not provide signals to enter the market.
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.
