To open long positions on EURUSD, you need to:
The first half of the day went well enough. Good fundamental data on Italy and Germany led to a small upward correction of EUR/USD. Let's look at the 5-minute chart and analyze the entry points. The bears tried to defend the level of 1.1884 and even formed a false breakout from it, however, the expected downward movement did not occur. Immediately after that, an entry point for long positions was formed. The reverse test of the top-down level of 1.1884 led to the formation of a buy signal. At the time of writing, the upward movement was more than 30 points.
In the second half of the day, the focus will shift to the new support of 1.1879, in the area in which buyers will try to form the lower border of a new ascending channel. The absence of important fundamental statistics will affect the exchange rate of the US dollar. If there is no active fall in US bonds, the pair may continue its growth. The formation of a false breakout in the support area of 1.1879 will lead to the formation of a signal to open long positions in the continuation of the morning trend. In this range, there are also moving averages that play on the side of buyers. An equally important task will be to break through and consolidate above the resistance of 1.1932, the test of which from top to bottom forms an additional entry point into long positions already with the target of 1.1994, where I recommend fixing the profits. If there is no bull activity in the area of 1.1879, it is best to postpone purchases until the test of a larger minimum of 1.1836, from which you can expect a rebound of 25-30 points within the day.
To open short positions on EURUSD, you need to:
The bears tried to defend the resistance of 1.1884, but it didn't work out very well. Now only the formation of a false breakout and a return to the level of 1.1932 form a signal to open short positions in the expectation of a downward correction of the euro. If there is no activity at this level, I recommend postponing sales immediately for a rebound from the larger resistance of 1.1994, from where you can sell the euro to move down by 20-25 points. An equally important task will be to return the support of 1.1879 to control, where the moving averages are now playing on the side of euro buyers. A breakout and a test of this range from the bottom up will form a good entry point into short positions with a target of 1.1836, where I recommend taking the profit. A return to the level of 1.1879 will also signal the end of the upward correction and the continuation of the decline of EUR/USD in the near future.
Let me remind you that the COT report (Commitment of Traders) for March 2 clearly shows how there is a sharp reduction in long positions and a very large increase in short ones, which indicates a clear shift in the market towards sellers of risky assets. This is confirmed by the chart of the fall of the euro, which we are seeing for the third week. This time, it was not possible to quickly win back another major decline of the pair down. The sharp rise in bond yields of many developed countries continues, which plays in favor of the US dollar, as investors expect that the United States will be the first to start raising interest rates, which makes the US dollar more attractive. The recent approval by the US Senate of a new aid package and a $ 1,400 payment to all Americans affected by the pandemic makes risky assets even less attractive. Therefore, it is better not to rush to buy euros but to wait for lower prices. A good plus for the euro will be the moment when European countries begin to actively curtail quarantine and isolation measures: Germany has already announced its plan in this direction, however, 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 improvement in the economic prospects and also strengthen the EUR/USD pair. The COT report shows that long non-profit positions declined to the level of 222,655 from the level of 228,501, while short non-profit positions increased from the level of 90,136 to the level of 96,667. As a result, the total non-profit net position declined again for the third week in a row to 125,988 from 138,365. The weekly closing price was 1.2048 against 1.2164 a week earlier.
Signals of indicators:
Moving averages
Trading is conducted above 30 and 50 daily moving averages, which indicates an attempt by buyers to return to the market.
Note: The period and prices of the moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
Bollinger Bands
In the event of a decline in the euro, the average border of the indicator in the area of 1.1860 will act as support.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit 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 the short and long positions of non-commercial traders.
