In my morning forecast, I paid attention to the levels of 1.0825 and 1.0795 and recommended making decisions on entering the market. Let's look at the 5-minute chart and figure out what happened there. Despite quite tolerable data on activity in the eurozone countries, the pressure on the euro remained in the first half of the day. The breakthrough of 1.0825 occurred without a reverse test from the bottom up. For this reason, I could not get a good signal to open short positions. As a result, the euro declined to the next support of 1.0795, where buyers began to act more actively. The formation of a false breakdown at this level led to a signal to buy the euro, but all the bulls could achieve was an upward movement of 15 points. For the second half of the day, the technical picture has changed slightly, although the chances of buyers of the European currency fighting back are less and less. And what were the entry points for the pound this morning?
To open long positions on EURUSD, you need:
During the American session, the President of the European Central Bank, Christine Lagarde, will speak, who may repeat her statements regarding a more aggressive policy of the central bank in the near future. But judging by yesterday's market reaction, it is unlikely that this will help the euro much. With the aggravation of the geopolitical situation, high inflation, and an increase in the likelihood of slipping into recession, there are fewer and fewer people willing to bet on risky assets, which include the European currency. In the afternoon, reports on the US economy and data on activity in the US are expected. In the eurozone, growth has persisted, but the pace is gradually slowing down. There will be no such problem in the US, at least until the Fed increases interest rates. Therefore, in case of good indicators on the index of business activity in the manufacturing sector, the index of business activity in the services sector, and the composite PMI index, I advise you to bet on the purchase of the US dollar. All that remains for the bulls now is the protection of the nearest support of 1.0795. To miss, it is tantamount to missing the initiative. While trading will be conducted above this range, we can expect an upward correction to the area of 1.0826. An additional false breakout at 1.0795 after Lagarde's speech will strengthen the position of buyers at the end of the week, but I would not count on this level much. When implementing a bullish signal, the goal will be to return to the resistance of 1.0826. A breakout and a test of this range from top to bottom, together with weak data on the US economy and hawkish statements by ECB representatives, form an additional signal to enter long positions, opening up the possibility of restoring the pair to the 1.0858 area, where the moving averages are playing on the sellers' side. A more distant target will be the 1.0894 area, where I recommend fixing the profits. If EUR/USD declines in the afternoon and there are no buyers at 1.0795, it is best to postpone long positions. The optimal scenario for buying will be a false breakdown in the area of 1.0769, from where the bulls showed themselves at the beginning of this week. It is possible to open long positions on the euro immediately for a rebound only from 1.0723, or even lower - around 1.0682 with the aim of an upward correction of 30-35 points inside the day.
To open short positions on EURUSD, you need:
Sellers continue to exert pressure and cope with it quite successfully. A slight rebound from 1.0795 indicates only a pause and a market check. Of course, the primary task will be to protect the nearest resistance of 1.0826, formed by the results of the first half of the day. Christine Lagarde's hawkish statements will surely lead to a test of this level. Therefore, the formation of a false breakdown there, together with strong fundamental data for the United States, form a sell signal to reduce to the area of 1.0795 and its breakdown. A bottom-up test of this range will lead to a new sell-off of the euro, followed by a fall to 1.0769. The lows remain a longer-range target: 1.0723 and 1.0682, where I recommend fixing the profits. If the euro rises in the afternoon and there are no bears at 1.0826, I expect a sharper upward jerk of the pair, as the bears will start taking profits at the end of the week. In this case, the optimal scenario will be short positions when forming a false breakdown in the area of 1.0858 and moving averages. You can sell EUR/USD immediately on a rebound from 1.0894, or even higher - around 1.0931 with the aim of a downward correction of 25-30 points.
The COT report (Commitment of Traders) for April 12 recorded a sharp increase in long positions and a slight reduction in short ones. All this is characterized by positive expectations of new measures from the European Central Bank, which Christine Lagarde told us about last week. The fact that the ECB plans to fully complete the bond purchase program by the third quarter of this year, and at the same time start raising interest rates indicates clear measures to combat high inflation in the eurozone, which seriously affects household incomes. But there is no such problem in any eurozone. Last week's data showed that in the United States, the consumer price index also reached its maximum in the last 40 years. This forces the Fed to act much more aggressively than before. Everyone expects an increase in interest rates by 0.5% immediately at the May meeting. Thanks to this, the US dollar continues to be in demand, which will continue to push the EUR/USD pair down. Russia's new active actions on the territory of Ukraine and the lack of progress on the settlement of the conflict also put pressure on the euro and will continue to do so. The COT report indicates that long non-profit positions have increased from the level of 210,914 to the level of 221,645, while short non-profit positions have decreased from the level of 183,544 to the level of 182,585. Despite the growth of long positions, the COT report is always secondary, and given how quickly the market situation is changing, these figures now do not reflect the whole picture. On the other hand, the decline of the euro makes it more attractive to investors, so the accumulation of long positions is not surprising. At the end of the week, the total non-commercial net position increased to 39,060 against 27,370. The weekly closing price fell by almost 100 points from 1.0976 to 1.0877.
Signals of indicators:
Moving averages
Trading is conducted below 30 and 50 daily moving averages, which indicates the likelihood of a resumption of the bear market.
Note: The period and prices of 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 case of growth, the upper limit of the indicator around 1.0860 will act as resistance.
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 use the futures market for speculative purposes and to 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.
