Yesterday, a lot of excellent signals were formed to enter the market, which helped us make good money. Let's look at the 5-minute chart and figure out where and how it was possible and necessary to trade. The euro returned below 1.0890 after the European Central Bank's decision on rates, but the speech of ECB President Christine Lagarde changed quite a lot. In my morning forecast, I paid attention to the 1.0885 level and advised you to make decisions from it. The breakthrough occurred without a reverse test from the bottom up, so no signals were formed to enter the market. In the afternoon, I still waited for the bottom-up update of 1.0889 and a false breakout to form there, which provided an excellent entry point into short positions. As a result, the pair fell by 110 points. Bulls managed to stop the bear market only around 1.0772, forming several false breakouts there - as a result of which the pair grew by 50 points.
To open long positions on EUR/USD, you need:
Strong data on retail sales in the United States, which surprisingly did not decrease due to high inflation, as well as the growth of the consumer confidence indicator to a new high - all this led to the strengthening of the US dollar against the euro. Lagarde's speech was not as hawkish as many expected, although she repeated the central bank's position on curtailing the bond purchase program and raising interest rates – although she did not name specific dates. This caused the euro to fall, as traders decided to switch to the actions of the Federal Reserve next month and to raise rates immediately by 0.5%. A number of data on inflation in France and Italy are coming out today, which may provide some support for the euro, but you shouldn't count on them too much.
Now, in order to see a new upward correction, it is necessary to witness growth and actions above 1.0833 – there are moving averages playing on the bears' side. A breakthrough and a test of this range from top to bottom creates a signal to enter long positions, which will open up the possibility of restoring the pair to the area of 1.0885. In case of growth above this level, as well as a rather sharp inflationary jump in the eurozone countries, bulls will hit the bears' stop orders, opening a direct road to the highs: 1.0931 and 1.0970, where I recommend taking profits. In case the pair falls further, the focus will be on the nearest support of 1.0776. Only a false breakout at this level will lead to creating a signal to buy euros. If the pair falls and there are no bulls at 1.0776, it is best to postpone long positions. The optimal scenario for buying would be a false breakout near the new monthly low of 1.0728. It is possible to open long positions on the euro immediately for a rebound only from 1.0636, or even lower – around 1.0572 with the goal of an upward correction of 30-35 points within the day.
To open short positions on EUR/USD, you need:
The bears coped with all the tasks set for them yesterday and updated weekly lows. This indicates the continuation of the downward trend for the pair. The primary task for today is to protect the nearest resistance of 1.0833, on which quite a lot depends. Forming a false breakout there and weak inflation data in France and Italy will lead to a return of pressure and a sell signal with a view to further decline along the trend to a new support of 1.0776. To preserve the bear market, it is important to update local lows daily, so a breakdown and a reverse test from the bottom up of 1.0776 will lead to a new sell-off of the euro, followed by an exit to the lows: 1.0728 and 1.0636, where I recommend taking profits. The 1.0572 area will be a more distant target, but such a scenario is possible only in case of a sharp aggravation of geopolitical relations. If the euro rises in the first half of the day and there are no bears at 1.0833, I expect a sharper movement of the euro up. In this case, the optimal scenario will be short positions when forming a false breakout in the area of 1.0885. You can sell EUR/USD immediately on a rebound from 1.0931, or even higher – around 1.0970 with the goal of a downward correction of 25-30 points.
I recommend for review:
The Commitment of Traders (COT) report for April 5 logged an increase in both short and long positions and, remarkably, there were more bulls than bears. All this is characterized by positive expectations of new measures from the European Central Bank, which has recently been talking a lot about the need for a tighter monetary policy. However, the lack of positive dynamics of the negotiations between Russia and Ukraine, and the growth of geopolitical tensions continue to negatively affect the euro, which does not allow the bulls to build even a normal upward correction. In the near future, we expect important data on inflation in the eurozone and the United States. The reports will contain more objective figures on the rate of price growth after the start of the Russian military special operation. This will give investors and politicians more guidance on how to proceed with monetary policy, which will partially determine the further direction of the EUR/USD pair. The COT report indicates that long non-commercial positions increased from the level of 200,043 to the level of 210,914, while short non-commercial positions increased from the level of 178,669 to the level of 183,544. Considering that the growth of short positions turned out to be less impressive than long ones, at the end of the week the total non-commercial net position increased to 27,370 against 21,374. The weekly closing price dropped to 1.0976 from 1.0991.
Indicator signals:
Trading is conducted below the 30 and 50 day moving averages, which indicates the bears' return to the market.
Moving averages
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 upper indicator in the area of 1.0885 will act as resistance. In case the euro falls, the lower border in the area of 1.0760 will provide support.
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.
