To open long positions on EUR/USD, you need:
In yesterday's afternoon forecast, I paid close attention to the 1.2041 level and advised you to trade based on it. Let's take a look at the 5-minute chart and talk about what happened. You can clearly see how the bears are trying to surpass the 1.2041 level in the first half of the day, and after testing it from the bottom up, it creates a signal for entering open short positions in sustaining the downward trend. Several false breakouts with a subsequent return to the area below this level confirmed the bear market. The speech of Federal Reserve Chairman Jerome Powell led to a large sell-off of the European currency, and so it reached support areas like 1.1994 and 1.1952, where trading is currently taking place.
Like yesterday, buyers need to think about protecting support at 1.1952, which was tested in today's Asian session. Important fundamental reports on the European economy will not be released in the morning, so you can count on forming a false breakout in the support area at 1.1952. The main goal is to return to the resistance area of 1.1994, slightly above which are the moving averages that play on the side of sellers. A breakout and being able to test the 1.1994 level from top to bottom creates another buy signal, in hopes that the pair would rise to resistance at 1.2041, where I recommend taking profits. The succeeding target will be the 1.2087 area. If bulls are not active in the support area of 1.1952 during the first half of the day, then I would recommend holding back from long positions until a larger low like 1.1921 has been tested, from which you can open longs immediately on a rebound, counting on an upward movement of 25-30 points within the day. The euro might be under pressure in the second half of the day after we receive the report on the change in the number of employees in the non-agricultural sector of the United States.
To open short positions on EUR/USD, you need:
The bears have come close to support at 1.1952, but they have not yet to fall below this level. Being able to break through and test the 1.1952 area from the bottom up can create an entry point for short positions in hopes of sustaining the bear market so the quote can reach a low like 1.1994, where I recommend taking profits. The absence of important fundamental statistics on the euro area may increase the pressure on the euro, especially after we've heard Federal Reserve Chairman Jerome Powell's statement on Treasury bond yields. The succeeding target will be the low of 1.1885. If EUR/USD grows in the first half of the day, then it would be best not to rush to sell, but to wait for a false breakout to form in the resistance area of 1.1994. This alone creates a convenient entry point into short positions in order to sustain the bear market. If the euro grows above resistance 1.1994, then I recommend opening short positions immediately on a rebound from a new high of 1.2041, counting on a downward correction of 25-30 points within the day. The next major resistance is seen around 1.2087.
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 below 30 and 50 moving averages, which indicates a succeeding decline for the euro.
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
In case of growth, the average border of the indicator in the 1.1994 area will act as resistance. The breakout of the lower border in the area of 1.1925 will only 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.
