On Friday, traders received several signals to enter the market. Let us focus on the 5-minute chart to clear up the market situation. Earlier, I attracted your attention to the level of 1.0852 so that you could decide when to enter the market.A false break of 1.0852 at the beginning of the European session led to a buy signal. As a result, the pair climbed by more than 40 pips, but failed to hit the key level of 1.0899. In the second part of the day, bulls tried to protect 1.0852. Although there was a false break, the pair did not show a significant rise. Only some time later, the euro reversed and started trading sideways.
Conditions for opening long positions on EUR/USD:
Today, the euro opened with a significant gap. However, the currency continued trading sideways. The jump was caused by the results of the first round of presidential elections in France. Macron currently has 27 % of the votes, while far-right presidential candidate Marine Le Pen is second with 24.5%. Everyone is looking forward to the second round, where the fight is expected to be more furious. The absence of positive news about the Russia-Ukraine talks and investors' pessimistic attitude to risk assets will continue exerting pressure on the euro early this week. That is why the currency will hardly show a considerable increase. Today, the eurozone will hardly publish any report that will encourage buyers of the euro. That is why traders should consider selling the euro from strong levels or in case of the pair's rise. If the euro declines, only a false break of the support level of 1.0847 will give the first signal to buy the asset. To slacken the bearish movement, the pair should jump and bulls should be active at the middle level of the range located at 1.0894. A downward break of this level will give an additional signal to open long positions, thus allowing the pair to recover to 1.0936. Notably, on Friday, the price failed to reach this level. If the pair exceeds this level, it is likely to reach such highs as 1.070 and 1.1007. In case of a further decline and bulls' failure to protect 1.0847, it will be better to avoid opening long positions. It will be possible to buy the euro after a false break of the low of 1.0810. Traders may also go long from 1.0772 or lower – from 1.0728, expecting a rise of 30-35 pips within one day.
Conditions for opening short positions on EUR/USD:
On Friday, bears tried to fix at the monthly lows. However, they failed to do so due to the fact that traders were locking in profits at the end of the trading week. Since the market sentiment remains bearish, the downtrend is likely to continue at the beginning of the week. Elections in France are the only fact that prevents the euro from dropping. Today, sellers should primarily protect the nearest resistance level of 1.0894. A false break of this level may put the euro under pressure again, thus giving a sell signal with the target at the intermediate support level of 1.0847. To continue falling, the euro should hit new local lows every day. In fact, it is not a problem at the moment. A break and an upward test of 1.0847 will give a sell signal, thus allowing the pair to slide to the lows of 1.0810 and 1.0772, where it is recommended to lock in profits. In case of a rise in the euro, only a false break of 1.0894 will provide traders with the first sell signal. However, if bears fail to protect this level nothing special will happen. The euro will skyrocket only amid positive news about the Russia-Ukraine talks. However, we will hardly receive encouraging information in the near future. Thus, it will be wise to open short positions after a false break of 1.0936. It is also possible to sell the pair from 1.0970 or higher – from 1.1007, expecting a decline of 25-30 pips.
Commitment of Traders Report
The COT report from March 29 unveiled a decrease in both short and long positions. Notably, the number of buyers who left the market exceeded the number of sellers who decided to stop trading. This fact points to pessimism among market participants caused by the current geopolitical situation. Meanwhile, a risk of higher inflation in the eurozone is the key issue for the ECB. Importantly, inflation has already jumped to 7.5%. Last week, Christine Lagarde several times emphasized the regulator's intention to switch to a more aggressive approach to the QE tapering and key interest rate hike. Against this background, the euro has a good mid-term prospect for growth. At present, the single currency is significantly oversold against the greenback. However, the absence of positive results in the Russia-Ukraine talks and a rise in the geopolitical tension have a negative influence on the euro. Economic problems in the eurozone provoked by extremely high inflation and responsive measures taken by Russia (including payments for gas in rubles) are likely to continue exerting pressure on the euro in the short term. That is why traders will hardly see a considerable increase in the pair. According to the COT report, the number of long non-commercial positions slid to 200,043 from 207,051. At the same time, the number of short non-commercial positions slumped to 178,669 from 183,208. Since a drop in the number of short positions turned out to be more significant, the overall non-commercial net position declined to 21,374 from 23,843. The weekly close price also dropped to 1.0991 from 1.1016.
Signals of indicators:
Moving Averages
Trading is conducted below 30- and 50-day moving averages, which indicates a further drop in the euro.
Note: The period and prices of moving averages are considered by the author on the one-hour chart that differs from the general definition of the classic daily moving averages on the daily chart.
Bollinger Bands
If the euro rises, the upper limit of the indicator located at 1.0910 will act as resistance. In case of a drop, the lower limit of 1.0845 will act as a support level for the euro.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph.
- MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9.
- Bollinger Bands. The period is 20.
- Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions is a total number of long positions opened by non-commercial traders.
- Short non-commercial positions is a total number of short positions opened by non-commercial traders.
- The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.
