Yesterday, traders received several perfect signals to enter the market. As a result, they managed to make a profit regardless of low volatility. Let us take a look at the 5-minute chart to analyze the market situation. Earlier, I asked you to focus on the level of 1.0808 so that you could decide when to enter the market. It is clearly seen that buyers benefited from the absence of statistical reports and pushed the price to 1.0808. However, an unsuccessful attempt to consolidate above this level and a false break led to a sell signal. As a result, the pair dropped by 25 pips and pressure on the euro became lower. The pair failed to approach the nearest support level of 1.0761. In the second part of the day, traders got a sell signal from 1.0808, which brought them 25 pips. However, early today, the market situation was a bit different from the technical point of view.
Conditions for opening long positions on EUR/USD:
Buyers of the euro pushed the price above 1.0808. Now, they should protect this level. Otherwise, the situation may change significantly amid weak fundamental data from the eurozone. Today, Germany is going to disclose data on the producer price index, business sentiment, the current situation indicator, and economic expectations indicator from the IFO institute. It is obvious that the economy will slow down amid the Ukrainian crisis and sanctions imposed by the EU. All these have had a considerable influence on supply chains and logistics. High inflationary pressure will also negatively affect the expectations. Weak reports are likely to cause a decline in the euro to 1.0808. Thus, bulls should protect this range. A false break of 1.0808 will give the first signal to buy the euro with the target at 1.0848. However, the pair will hardly exceed this level. Only very strong data on the eurozone industrial production and trade balance as well as hawkish comments provided by Member of the Governing Council of the ECB Joachim Nagel could boost the pair above 1.0848. This action will provide traders with a new long signal.In this case, the pair will have a chance to recover to 1.0885. If it climbs higher, it may reach such highs as 1.0931 and 1.0970, where it is recommended to lock in profits.If the pair declines and buyers fail to protect 1.0808, which is a more likely scenario, it will be better not to open long positions. Traders may start buying the euro after a false break of the monthly low of 1.0761. It is also possible to go long from 1.0723 or lower – from 1.0636, expecting a rise of 30-35 pips.
Conditions for opening short positions on EUR/USD:
Although sellers take the wait-and-see approach, they will hardly lose control over 1.0808. A lot will depend on statistical data. That is why today, sellers should first protect 1.0848, which the pair may reach amid strong reports from Germany. A false break of 1.0848 will give the first sell signal with the target at 1.0808. To retain the bearish sentiment, sellers should regain control over this level. A break and an upward test of 1.0808 will cause a new sell-off of the euro. In this case, the currency may slide to this month's low of 1.0761. The bearish sentiment will return after a break of this level. An upward test of 1.0761 will provide traders with a sell signal with the target at 1.0723 and 1.0636, where it is recommended to lock in profits. A farther target is located at 1.0572. However, this scenario will become possible only in case of a sudden worsening of the geopolitical situation. If the euro rises in the first part of the day and bears fail to protect 1.0848, the euro may show a jump. In this case, sell orders could be initiated after a false break of 1.0885. Traders may also sell the asset from 1.0931 or higher – from 1.0970, expecting a decline of 25-30 pips.
COT report
According to the COT report from April 12, the number of long positions surged, whereas the number of the short ones dropped. Such a change reflects expectations that the ECB will take some measures to cap inflation growth. Christine Lagarde announced such a possibility last week. The fact is that the ECB is planning to complete the asset purchase program by the third quarter of the year and start increasing the benchmark rate to curb inflation that has a significant influence on households. Notably, many countries have faced such a problem. The previous week's report unveiled that the US consumer price index approached the highest level last seen 40 years ago. This fact may force the Fed to take even more radical measures. During the next meeting, which is scheduled for May, the regulator may raise the key interest rate by 0.5%. Against this backdrop, demand for the US dollar remains high, thus pushing the euro/dollar pair lower. The euro is also affected by the Russia-Ukraine conflict and the lack of progress in the negotiations.The COT report reads that the number of long non-commercial positions increased to 221,645 from 210,914, whereas the number of short non-commercial positions inched down to 182,585 from 183,544. Although the number of long positions jumped, we should remember that the COT report is of minor importance since the market situation changes rapidly. In other words, these figures do not reflect the real state of affairs. On the other hand, a drop in the euro makes it more attractive for investors. That is why a jump in long positions was quite expectable. According to the previous week's results, the total non-commercial net position climbed to 39,060 from 27,370. The weekly closing price slumped by almost 100 pips to 1.0877 from 1.0976.
Signals of indicators:
Moving Averages
Trading is performed above the 30- and 50-day moving averages, thus pointing to an attempt to form an upward correction.
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
In case of a rise, the upper limit of the indicator located at 1.0820 will act as resistance.
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.
