In my morning article, I turned your attention to 1.0630 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and figure out what actually happened. An upward movement and a false breakout of this level created a sell signal within the trend. At the time of writing the article, the pair has declined by about 20 pips. The bearish pressure remains intact. It appears traders are still locking in profits after closing short positions. For the afternoon, the technical outlook remained the same.
When to open long positions on EUR/USD:
The Euro Area Services PMI Index turned out to be worse than forecasts, which undermined an upward movement of the euro and bolstered bearish bias. In the afternoon, traders are anticipating similar data for the United States. What is more, the US will unveil the ISM Non-Manufacturing Index. Rafael Bostic will deliver a speech. If his comments are hawkish, we could expect a surge in volatility. If economic reports are strong, bears will assert strength. Given that the technical outlook has not changed, I will act according to the morning plan. A false breakout of the support level of 1.0598 will give an excellent buy signal. After that, the par could touch the resistance level of 1.0630. It has already failed to climb above this level today. A breakout and a downward test of 1.0662 amid weak data will provide entry points into long positions with a jump to 1.0660. It will be hard for the bulls to push the pair above this level. A breakout of 1.0660 will force bears to close Stop Loss orders, changing the market trend and giving an additional buy. The quotes could advance to 1.0690 where I recommend locking in profits. If EUR/USD declines and buyers show no energy at 1.0598 in the afternoon, the pressure on the pair will increase. A breakout of this level may trigger a fall to the support level of 1.0568. The pair failed to reach this level yesterday. Only a false breakout there will lead to a buy signal. You could buy EUR/USD at a low of 1.0535 or 1.0487, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
Sellers are in control now. As long as trading is carried out below 1.0630, the pressure on the pair will persist. Disappointing US economic data may undermine a bear market. If the pair climbs, bears are likely to aim at 1.0640. A false breakout of this level, similar to the one I have discussed above, will lead to a decrease to the support level of 1.0598. A breakout and an upward retest of this level will provide an additional sell signal. The pair may fall to 1.0568, which will bolster the bearish sentiment. If it settles below this level, a more significant drop to 1.0535 may occur. At this level, I recommend locking in profits. If EUR/USD rises during the American session and bears show no energy at 1.0630, I would advise you to postpone short positions until a false breakout of 1.0660. You could sell EUR/USD at a bounce from 1.0690, keeping in mind a downward intraday correction of 30-35 pips.
COT report
According to the COT report for January 31, the number of long positions increased, whereas the number of short ones dropped. It is obvious that this happened before the Federal Reserve and the European Central Bank announced their decisions on the key rates. In fact, the COT data from a month ago is of little interest now because of a technical problem in the CFTC that has been recently settled. This week is not rich in macroeconomic events. Therefore, the pressure on risk assets may ease somewhat, thus causing a correction in the euro/dollar pair. According to the COT report, the number of long non-commercial positions climbed by 9,012 to 246,755, whereas the number of short non-commercial positions dropped by 7,149 to 96,246. Consequently, the non-commercial net position came in at 150,509 versus 134,349. The weekly closing price fell to 1.0893 from 1.0919.
Indicators' signals:
Trading is carried out below the 30 and 50 daily moving averages, which indicates further downward movement.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If EUR/USD rises, the indicator's upper border at 1.0625 will serve as resistance.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked 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 the short and long positions of non-commercial traders.
