To open long positions on EUR/USD, you need:
The euro continued to decline last Friday, although the sell signal, which was formed in the first half of the day, turned out to be unprofitable. The profit was brought by purchases. Let's take a look at the 5-minute chart and break down the trades. You can see how after surpassing support at 1.2140, the level is tested in reverse. This scenario creates a good signal to open short positions, which was not realized, as the bulls are quickly bringing the pair back to the 1.2140 level. Also, in my forecast, I recommended buying the euro on a rebound from the low of 1.2093. This signal worked out 100%, because as soon as this level was reached, the pair turned around and quickly went back to the 1.2140 level - which is about 50 points of profit.
This morning buyers will focus on regaining control of resistance at 1.2093, as this alone can set aside the bearish trend that we have seen since the middle of last week. Good data on manufacturing activity in the eurozone countries and inflation in Germany should help the bulls to cope with this task. The test of this level from top to bottom creates a good buy signal in hopes to return to resistance of 1.2140, where I recommend taking profit. A more distant level will be the area of 1.2190. In case the euro falls, divergence may form on the MACD indicator, so I recommend opening long positions immediately to a rebound from the low of 1.2037 (similar to the long positions from last Friday), which should lead to an upward correction of the pair by 25-30 points within the day.
To open short positions on EUR/USD, you need:
The bears are trying to get the market under their control and until the moment when trade is carried out below the resistance of 1.2093, the pressure on the euro will remain. In case of a false breakout scenario and an unsuccessful attempt by the bulls to regain this level, it is possible to open new short positions during the bear market in anticipation of reaching the low of 1.2037, where I recommend taking profits. At this point, a divergence may be formed on the MACD indicator, indicating the end of the bearish trend. Under the scenario of good fundamental data for the eurozone countries, of which a large amount is expected this morning, the pair may move above the resistance of 1.2093. In this case, it is best to open short positions immediately on a rebound from the resistance of 1.2140, counting on a downward correction of 25-30 points within the day. Moving averages, playing on the side of the euro sellers, also pass there.
The Commitment of Traders (COT) report for February 16 revealed that there were no significant changes in the positions of large players, which once again indicates the temporary equilibrium of the pair before a new wave of growth this spring. The major decline from the previous week was won back, and this confirms the theory that the demand for the US dollar continues to decrease among investors. Therefore, a more correct approach to the market is to buy the euro for the medium term. A good factor for the euro would be the moment when European countries begin to actively roll back quarantine and isolation measures, and the services sector will start working in full force again, which will lead to an improved economic outlook and also strengthen the EUR/USD pair. The COT report indicated that long non-commercial positions rose from 220,943 to 222,895, while short non-commercial positions rose from 80,721 to 82,899. As a result, the total non-commercial net position slightly narrowed after rising to 140,006 from 140,222. The weekly closing price was 1.2132 against 1.2052 a week earlier, which indicates the presence of buyers in the market.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates that the bears remain in control of the market.
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 average border of the indicator in the area of 1.2095 will lead to a new wave of euro growth. In case the pair falls, support will be provided by the lower border of the indicator at 1.2055.
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.
