To open long positions on EUR/USD, you need:
Given the lack of important fundamental reports in the afternoon, the pair spent the US session in a narrow horizontal channel, never reaching the levels I mentioned. Therefore, there were no signals to enter the market. Let me remind you that I paid attention to the 1.1884 level in the first half of the day and advised you to act based on it. The pair surpassed 1.1884 without a reverse test, which did not allow us to enter with short positions at the very beginning of the movement. A little later, when the upward test of the 1.1884 level took place, it was impossible to sell the euro. I analyzed the deal in more detail in yesterday's forecast for the US session.
Before talking about the further prospects for the EUR/USD movement, let's see what happened in the futures market and how the Commitment of Traders (COT) positions have changed. The indicators of long and short positions underwent a number of changes in the COT report for April 6, it revealed that the indicators of long and short positions significantly increased, which indicates that the bears are still in control of the market. Long positions continued to decline, which led to another drop in the positive delta. Last week we received a number of fundamental reports, but the International Monetary Fund's meeting grabbed more attention, at which a number of agreements were reached to extend the debt deferral program until the end of this year and an initiative was created to support the poor countries most affected by the coronavirus. Last week, there was also a lot of talk about the bureaucratic delay in the implementation of the EU Recovery Fund, which limits the euro's growth potential in the near future. For this reason, the market remains on the side of the sellers of risky assets in the medium term, which may lead to forming a succeeding downward trend. Investors expect the United States to be the first to start raising interest rates, which makes the dollar more attractive. This week's inflation data could seriously affect the balance of power in the market in favor of dollar bulls. One can expect an improvement in the economic outlook for the eurozone only when restrictions are lifted and the service sector is restored. This can also return the medium-term trend of strengthening EUR/USD and push it to an upward trend.
The COT report indicated that long non-commercial positions declined from 194,764 to 192,230, while short non-commercial positions rose from 121,024 to 124,708. As a result, the total non-commercial net position continued to decline and reached 67,522 against 73,739 a week earlier. But the weekly closing price rose to 1.1816 against 1.1768 last week.
Given the low volatility, I had to abandon some levels and revise the immediate resistance. Yesterday's sharp rise in the euro did not continue and the bulls stopped in the area of last week's highs. Today we will have a more eventful day in regards to fundamental indicators. In the morning, traders will be drawn to reports on the index of business sentiment from the ZEW Institute for Germany and the eurozone. Strong results are expected, which may allow the euro to continue strengthening against the US dollar. Therefore, traders will focus on resistance at 1.1918. A breakthrough and consolidation above this level with a reverse test from top to bottom creates a good signal for you to continue opening long positions in hopes that the pair would rise to a high like 1.1953, where I recommend taking profits. The next major resistance is seen around 1.1987. If new bulls do not support yesterday's upward movement, and the latest reports turn out to be worse than economists' forecasts, then it is best not to rush into long positions, but instead you should wait for EUR/USD to fall and form a false breakout in the support area of 1.1868, from where you can open long positions. If bulls are not active at this level, then I recommend holding back from long positions until the test of support at 1.1828, from where you can buy the pair immediately on a rebound, counting on an upward correction of 20-25 points within the day.
To open short positions on EUR/USD, you need:
The bears need to think of a way to protect resistance at 1.1918, since plans for a downward correction depend on this level. Forming a false breakout in this range in the first half of the day can create a good signal for you to open short positions in order to return to the support area of 1.1868. A significant struggle for this level will begin, as it can determine the succeeding upward trend for the euro, which was formed at the beginning of this month. A breakthrough and consolidation below this range with a reverse test from the bottom up can create a good entry point for short positions in hopes of returning EUR/USD to the 1.1828 low, where I recommend taking profits. The next target will be support at 1.1797. If sellers are not active in the 1.1918 area, then it is best to hold back from short positions until a larger high like 1.1953 has been renewed, from where you can open short positions immediately on a rebound, counting on a downward correction of 15-20 points within the day.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates the market's uncertainty regarding its succeeding direction.
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 area of 1.1918 will lead to a new wave of growth for the euro. Surpassing the lower border of the indicator around 1.1890 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.
