To open long positions on EUR/USD, you need:
Yesterday was not the best day for trading the euro, since it was not possible to get a directional movement. Let's take a look at the 5-minute chart and break down the entry points. The breakout and consolidation above the resistance of 1.2093 and the reverse test of this level should have resulted in creating a signal for buying the euro, but the next candlestick fell below this level, which canceled plans for entering the market. In the afternoon, a similar attempt was made to rise above 1.2093, which was also unsuccessful. We also failed to wait for a clear signal to sell the euro from the 1.2093 level, since this area was not tested from the bottom up.
From a technical point of view, nothing much has changed, except for the moment that buyers are not necessarily required to think about being able to surpass the 1.2087 level, but instead they should think of protecting support at 1.2041. In case we receive good data on the labor market of the eurozone and the volume of retail sales in January this year, one can count on a false breakout to form in the support area of 1.2041, below which it was not possible to surpass yesterday. The main goal of the bulls in this scenario will be to return to the resistance area of 1.2087, slightly below which there are moving averages that play on the side of sellers. A breakout and being able to test the 1.2087 level from top to bottom creates another buy signal in hopes that the pair would rise to resistance at 1.2138, where I recommend taking profit. The 1.2190 level will be a distant target. If bulls are not active in the support area of 1.2041 during the first half of the day, then I recommend postponing long positions until a larger low like 1.1994 has been tested, from which you can open longs immediately on a rebound, counting on an upward movement of 25-30 points within the day.
To open short positions on EUR/USD, you need:
The bears have come close to support at 1.2041, but they have not yet managed to fall below this level. Being able to break through and test the 1.2041 area from the bottom up can create an entry point for short positions in hopes of sustaining the bear market so it can reach a low like 1.1994, where I recommend taking profits. The euro might be under more pressure after we receive today's eurozone report for January 2021. The succeeding target will be the low of 1.1952. If EUR/USD grows in the first half of the day, then it is best not to rush to sell, but to wait for a false breakout to form in the resistance area of 1.2087. This alone creates a convenient entry point into short positions in order to sustain the bear market. If we receive a good fundamental report for the eurozone, the pair may move away from resistance at 1.2087. In this case, it is best to open short positions immediately on the rebound from the new high of 1.2138, counting on a downward correction of 25-30 points within the day. The next major resistance is seen at 1.2190.
The Commitment of Traders (COT) report for February 23 revealed that there were no significant changes in the positions of large players, however, the growth of short positions shows how the buyers' advantage is starting to fade. This time, it was not possible to quickly win back the sharp decline in the pair, which we have observed since the middle of last week. The sharp rise in bond yields in many developed countries favors the US dollar, as investors expect America to be the first to start raising interest rates, which makes the greenback more attractive. Buyers of risky assets should not rush to return to the market, and it is better to wait for lower prices. A good advantage for the euro is the moment when quarantine and isolation measures begin to ease in European countries: Germany has already announced its plan in this direction, but it has not yet come to the point. It is also necessary to wait for the moment when the service sector will start working again in full force, which will lead to an improved economic outlook and will also strengthen the EUR/USD pair. The COT report indicated that long non-commercial positions rose to 228,501 from 222,895, while short non-commercial positions rose from 82,899 to 90,136. As a result, the total non-commercial net position fell again from 140,006 to 138,365 for the second consecutive week. The weekly closing price was 1.2164 against 1.2132 a week earlier.
Indicator signals:
Moving averages
Trading is carried out below 30 and 50 moving averages, which indicates an attempt by the bears to return pressure to the euro.
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
A breakout of the upper border of the indicator in the 1.2075 area will lead to a new wave of growth for the euro. A break of the lower border in the 1.2041 area will increase the pressure on the euro.
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.
