To open long positions on EUR/USD, you need:
The International Monetary Fund's revision of its economic forecast on the growth rate of the world economy caused the euro to sharply grow. In my morning review, I paid attention to the 1.1821 level and advised you to act based on it. Let's take a look at the 5-minute chart and analyze all the entry points: you can clearly see that, after the bulls failed to rise above resistance at 1.1821, there was a signal to open short positions. However, even despite the disappointing report on the eurozone unemployment rate, which remained unchanged (although a decline was expected), we did not really expect a major downward movement. Then, after the release of the IMF report, there was a breakthrough and so the pair settled above the 1.1821 level. But, unfortunately, I did not wait for a reverse test of this area, so I missed all that large upward movement, which was then observed at the 1.1855 level. Selling from this range was pointless as there was a large bullish trend.
The pair is stuck in the 1.1855-1.1893 horizontal channel at the moment and all that the bulls need to is to settle above the range of 1.1893: a test of this level from top to bottom generates a signal to open new long positions in continuing the upward correction in the area of a high like 1.1930, where I recommend taking profit. The next target will be the 1.1987 level, but it will only be possible to get to this level if the fundamental indicators for the eurozone services turn out to be good. But before buying above 1.1893, pay attention to the MACD indicator and the fact that it was in the overbought area. Divergence on it after the renewal of the high at 1.1893 can significantly limit the pair's growth potential. If EUR/USD falls in the first half of the day, then the bulls need to think about protecting support at 1.1855. Forming a false breakout there (by analogy with the deal that I analyzed above) will lead to creating a good entry point for buying the euro. If the bulls are not active in the 1.1855 area, then it is best to postpone long positions until the test of the local low of 1.1821, slightly above which the moving averages are, playing on the side of buyers. You can open long positions from there immediately on a rebound, counting on an upward correction of 15-20 points within the day.
To open short positions on EUR/USD, you need:
Bears will count on weak data on the services sector in the euro area. Given the fact that quarantine has been introduced in many European countries, their expectations may come true. The initial task is to settle below the 1.1855 level. Testing this area from the bottom up can create an excellent signal to open short positions, and the closest target will be support at 1.1821, where I recommend taking profits. A breakthrough of this range will also lead to a rapid decline in EUR/USD to the area of a low like 1.1779, but this requires very bad data on the eurozone and unexpected decisions at the meeting of the G20 leaders and the International Monetary Fund. In the EUR/USD growth scenario in the first half of the day, forming a false breakout in the 1.1893 area along with the divergence on the MACD indicator will lead to forming a good entry point to short positions while aiming for a downward correction. If the bears are not active at 1.1893, then I recommend selling EUR/USD only on a rebound from the next major resistance at 1.1930, and then, counting on a downward correction of 15-20 points within the day.
The Commitment of Traders (COT) report for March 30 revealed that the indicators of long and short positions underwent a number of changes - especially a strong growth in short positions, which indicates that bears are in control of the market. The delta fell as a result of a small decline in long positions and a sharp rise in short ones. European countries continue to be quarantined this spring due to a new strain of coronavirus and a weak vaccination program that was carried out in the winter. This is causing serious harm to the economy, and there is already talk among analysts that the eurozone's GDP may decline in the second quarter as well. Bureaucratic delays in the implementation of the EU Recovery Fund are another reason for the weak growth of the eurozone economy during the Covid-19 pandemic this year. For this reason, the market remains on the side of sellers of risky assets in the medium term, which may lead to forming a downward trend. Investors expect the United States to be the first to start raising interest rates, which makes the dollar more attractive. 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 declined from 195,500 to 194,764, while short non-commercial positions rose from 102,178 to 121,024. As a result, the total non-commercial net position continued to decline again and reached 73,739 against 93,332 a week earlier. The weekly closing price also dropped to the 1.1768 area against 1.1932 a week earlier.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates that the euro will continue to grow.
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
Growth will be limited by the upper level of the indicator in the area of 1.1899. Surpassing the indicator's middle border around 1.1855 will increase 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.
