To open long positions on EUR/USD, you need:
Yesterday, three signals to enter the market were formed at once. Let's take a look at the 5-minute chart and analyze all the entry points. It is clear that after receiving an unexpectedly weak report on retail sales in Germany, the bears tried to push the pair below the 1.2003 level, but nothing much happened. Then this area was retested once again, but the buyers quickly returned the pair to this level, forming a false breakout. The divergence on the MACD indicator (which I mentioned in yesterday's forecast) has become another confirmation of the correct entry point into long positions. As a result, there is an upward movement to the resistance area of 1.2037, where it was possible to take profits. Total: +30 points. A false breakout was formed when this level was tested again, but this does not lead to a major downward movement. The best that we could count on was 15 points, but even then it was difficult to understand that the downward movement was over. In the second half of the day, there is a breakdown and consolidation above the resistance of 1.2037. Being able to test this level on the reverse side creates a signal to open new long positions in order to update the 1.2093 level , which is what happened. The upward movement brought about 55 points.
This morning buyers will focus on regaining control over resistance at 1.2093, since this can continue the upward correction, which we have been observing since yesterday. Today there are a number of important reports on the service sector of the countries of the eurozone and the United States. Good data should help bulls meet this challenge. Being able to test the 1.2093 level from top to bottom creates a good buy signal in hopes for the pair to rise to resistance at 1.2140, where I recommend taking profit. A more distant level will be the area of 1.2190. In case the euro falls after the release of weak data on activity in the services sector of the eurozone countries, then it would be best not to rush into buying the euro, but to wait for an update of support at 1.2038, which is where EUR/USD mainly grew yesterday. From there, you can buy immediately on a rebound while counting on an upward correction of the pair of 25-30 points within the day. Moving averages that play on the side of buyers also pass there. The next big support is seen only in the 1.1992 area.
To open short positions on EUR/USD, you need:
The bears are not very active yet, so focus will be on the data on the service sector of the eurozone countries - where, due to the coronavirus, the situation in the sector remains rather gloomy. Forming a false breakout in the resistance area of 1.2093 creates the first entry point into short positions in hopes to bring back the bear market and can also push the pair to return to the support area of 1.2038, where I recommend taking profits. The lower border of the current descending channel from February 2 is also passing in the area of 1.2093. A breakout and consolidation below 1.2038, along with being able to test this level from the bottom up, will create another entry point, and we can anticipate a decline in EUR/USD to the area of a low like 1.1992. In case we receive a good report on the activity of the services sector of the eurozone countries, the pair may get out of the area above the resistance of 1.2093. In this case, it is best to open short positions immediately on the rebound from the new high of 1.2140, counting on a downward correction of 25-30 points within the day. The next major resistance is seen at 1.2190.
The Commitment of Traders (COT) report for February 23 revealed that there were no significant changes in the positions of large players, however, the growth of short positions shows how the buyers' advantage is starting to fade. This time, it was not possible to quickly win back the sharp decline in the pair, which we have observed since the middle of last week. The sharp rise in bond yields in many developed countries favors the US dollar, as investors expect America to be the first to start raising interest rates, which makes the greenback more attractive. Buyers of risky assets should not rush to return to the market, and it is better to wait for lower prices. A good advantage for the euro is the moment when quarantine and isolation measures begin to ease in European countries: Germany has already announced its plan in this direction, but it has not yet come to the point. It is also necessary to wait for the moment when the service sector will start working again in full force, which will lead to an improved economic outlook and will also strengthen the EUR/USD pair. The COT report indicated that long non-commercial positions rose to 228,501 from 222,895, while short non-commercial positions rose from 82,899 to 90,136. As a result, the total non-commercial net position fell again from 140,006 to 138,365 for the second consecutive week. The weekly closing price was 1.2164 against 1.2132 a week earlier.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates the succeeding upward correction for 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
Growth will be limited by the upper level of the indicator in the 1.2125 area. A breakout of the middle border of the indicator in the area of 1.2065 will increase the pressure on the pair.
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.
