To open long positions on EUR/USD, you need:
Yesterday, once again, no signals were generated for entering the market due to low volatility. A fundamental report on the European economy did not have a significant impact on the pair. The afternoon also passed in a narrow horizontal channel, which did not lead to renewing any of the levels that I mentioned in my forecasts. But despite this alignment of forces, the market remains on the buyer's side, who can count on the euro's succeeding growth in the short term.
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 February 9 revealed an increase in short and long positions, which reflects the current situation. The equality of buyers and sellers clearly characterizes the entirety of last week, which is where the pair was, in a horizontal channel. It is important to note that any adequate decline in the EUR/USD pair has always been accompanied by quick buys, and the fact that the US dollar continues to be less and less in demand among investors has already been mentioned many times. Therefore, I think a more correct approach to the market is to buy the euro. The only problem for the euro is the lack of guidance from the European Central Bank and the risk of verbal intervention, which limits the growth potential. However, the demand for the euro will only increase with each significant downward correction in the pair. The COT report indicated that long non-commercial positions rose from 216,887 to 220,943, while short non-commercial positions rose from 79,884 to 80,721. As a result, the total non-commercial net position rose after last week's decline to 140,222 from 137,003. The weekly closing price was 1.2052 against 1.2067 a week earlier.
It is necessary to pay attention to today's important reports on the GDP of the eurozone, as well as to the data on the labor market for the end of last year. The eurozone economy is expected to contract in the fourth quarter of 2020, but if the actual data turns out to be better than economists forecasts, we can count on the succeeding growth of the euro. The eurozone finance ministers will host a meeting today, at which the topic of additional financing may be discussed. If EUR/USD grows in the first half of the day, buyers will focus on getting the pair to settle above the resistance of 1.2149. Testing this area from top to bottom creates an excellent signal to open long positions in euros in order to rise to a high of 1.2187, where I recommend taking profits. Bulls will still aim for resistance at 1.2220. 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 there creates a good entry point into long positions as we expect an upward trend. If buyers are not active at this level, I recommend holding back from long positions until the low of 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 in the event of a false breakout in the resistance area of 1.2149, which creates a signal to sell the euro. Returning to the area under 1.2149 and testing it from the bottom up creates a convenient point for entering the market. A bad report on the state of the European economy in the fourth quarter of 2020 may increase the pressure on the euro. Its divergence from forecasts will significantly affect the market and its future short-term prospects. Another important task for sellers is to return EUR/USD to the support area of 1.2110, as the pair's succeeding direction depends on whether the pair surpasses it or not. 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 distant 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 of 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.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates the bulls' attempt to continue the upward correction of the pair.
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
A breakout of the upper border of the indicator in the 1.2149 area will lead to a new wave of growth for the euro. A break of the lower border of the indicator in the 1.2125 area will increase pressure on the euro.
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.
