To open long positions on EUR/USD, you need:
Last Friday, there was only one signal to sell the euro in the afternoon. Let's take a look at the 5 minute chart and break down the entry point: a false breakout and failure to settle above resistance at 1.1802 in the middle of the US session led to creating a signal to open short positions further along the downward trend. However, given that it was the end of the week and the signal appeared at the end of the day, we did not see a sharp fall from the euro, and the downward movement was around 16 points. There were no other signals to enter the market, since the indicated levels were not tested.
Important fundamental reports will not be released today. And so volatility will be extremely low both in the morning and in the afternoon. It is not very pleasant to trade in such a market, since the pair is basically in a narrow horizontal channel without any definite direction, and the emerging signals give false entries. The bulls' main task is to protect support at 1.1760 in the first half of the day. Forming a false breakout there generates a signal to open long positions in hopes of an upward correction and a return to resistance at 1.1802, which we did not get to surpass last Friday. A breakthrough and being able to settle at this level creates an additional entry point into long positions for the purpose of reaching a high like 1.1842, where I recommend taking profits. EUR/USD will likely be under pressure if the bulls are not that active in the support area of 1.1760. In this case, I advise you to open new long positions on a rebound after updating the following lows: 1.1714 and 1.1682. You can count on them for an upward correction of 20-25 points within the day.
To open short positions on EUR/USD, you need:
Bears are in control of the market, as all the oversold and divergent indicators that could lead to an upward correction last week are over. Now, many indicators are in the area of zero levels, which indicates a rather high probability of a resumption of the downward trend. A breakthrough and test of the 1.1760 level from the bottom up creates an excellent signal to enter the market in continuing the euro's decline that was observed last week. In this case, the closest targets will be the lows: 1.1714 and 1.1682, where I recommend taking profits. In case EUR/USD grows in the first half of the day, then it is best not to rush to sell: the best option for opening short positions will be to form a false breakout in the resistance area of 1.1802. If the bears are not that active there, then I recommend postponing short positions immediately for a rebound from a large resistance at 1.1842, counting on a downward correction of 20-25 points within the day.
The Commitment of Traders (COT) report for March 15 clearly shows how the sharp reduction of long positions is taking place, however, the growth of those who want to sell the euro is gradually slowing down. Despite this, the market remains on the side of the sellers of risky assets, which may lead to forming a downward trend. This is confirmed by the graph of the euro's decline, which we have been observing since the end of February this year. The sharp rise in US 10-year bond yields favors the dollar as investors expect America to be the first to start raising interest rates, making the greenback more attractive. The recent Fed meeting has once again convinced investors that the US economy is recovering much faster than expected, increasing the risk of an earlier inflationary jump. At the moment, it is best not to rush into euro purchases, but to wait for lower prices. Another factor in the medium-term pressure on the euro is the rise in the incidence of coronavirus in the eurozone countries and the weak vaccination program. The problems with the Astrazeneca vaccine do not add confidence to investors, who are betting on a stronger summer growth rate for the EU economy. One can expect an improvement in the economic outlook for the eurozone only when restrictions are lifted and the service sector is restored, which will return the medium-term trend of strengthening EUR/USD. The COT report indicated that long non-commercial positions fell from 207,588 to 195,857, while short non-commercial positions only rose from 105,624 to 105,881. As a result, the total non-commercial net position fell from 101,964 to 89,976 for the fifth consecutive week. The weekly closing price was 1.1926 against 1.1812 a week earlier.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates a sort of pause for sellers in regards to the euro's decline.
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
Volatility is very low, which does not provide signals to enter the market.
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.
