To open long positions on EUR/USD, you need:
Trading was rather boring since volatility was low throughout the day. Let's take a look at the 5 minute chart and talk about what happened: the fundamental report on the European economy in the first half of the day failed to shake the market, as inflation in the eurozone coincided with economists' expectations. A similar situation was observed during the US session before the Federal Reserve announced its decision on monetary policy. The euro's sharp upward movement came after the FOMC report, which indicated a faster acceleration of economic growth in the United States this year. The Fed also noted that it expects to keep the base interest rate at about zero until 2023.
The euro stopped rising as quickly as it began. Traders were resting on the resistance at 1.1989, and all they achieved was a reversal of the downward trend and the pair hanging in the horizontal channel of 1.1884-1.1989. We will start from these levels. We expect European Central Bank President Christine Lagarde to deliver a speech today, so focus in the morning will shift to this. A breakout and consolidation above the resistance of 1.1989 along with being able to test this level from the bottom up creates a convenient entry point into long positions in hopes for EUR/USD to rise to a high of 1.2047, where I recommend taking profits. The next major resistance is seen around 1.2109. If Lagarde does not say anything new, it is best to open long positions with a downward correction to the middle of the 1.1939 horizontal channel. Forming a false breakout there creates the correct entry point for buying the euro. Moving averages, playing on the side of buyers, also pass slightly below this level. I advise you to consider long positions immediately for a rebound after testing the lower limit of the 1.1884 horizontal channel, counting on an upward correction of 20-25 points within the day.
To open short positions on EUR/USD, you need:
Bears need to be more proactive since they have one last chance to regain control of the market. Forming a false breakout at the 1.1989 level will be an excellent signal to open short positions in hopes to pull it down so it can reach the area of the middle of the 1.1939 horizontal channel. Considering that in the first half of the day, apart from Christine Lagarde's speech, important fundamental reports will not be released today, a breakthrough and consolidation below 1.1939 will quickly pull down EUR/USD to a low of 1.1884, where I recommend taking profit. If traders are not that active in the resistance area of 1.1989, and the bulls achieve a breakthrough and growth above this area, then it would be best to open short positions on a rebound from the next major resistance in the area of 1.2047, counting on a downward correction of 20-25 points within the day. Another major high is also clearly visible in the 1.2109 area.
The Commitment of Traders (COT) report for March 9 clearly shows a sharp decline in long positions and a very large increase in short positions, which indicates a continued shift in the market towards sellers of risky assets. This is confirmed by the euro's decline, which we have seen since the end of February. Bond yields in many developed countries continue to sharply rise, which plays in favor of the dollar, as investors expect the United States to be the first to start raising interest rates, which makes the greenback more attractive. The European Central Bank's recent meeting did not change the market, as the decisions made were not critical and did not affect investor sentiment in any way. It is best not to rush into euro purchases, but to wait for lower prices. The growth in the incidence of coronavirus is another factor of medium-term pressure on the euro. The slow vaccination program for the population is pushing the cancellation of quarantine measures to a later date. We can only expect an improvement in the economic outlook for the eurozone once restrictions are lifted and the service sector is restored, which will return the medium-term trend to strengthening EUR/USD. The COT report indicated that long non-commercial positions declined from 222,655 to 207,588, while short non-commercial positions rose from 96,667 to 105,624. As a result, the total non-commercial net position declined again for the fourth consecutive week, from 125,988 to 101,964. The weekly closing price was 1.1812 against 1.2048 a week earlier.
Indicator signals:
Moving averages
Trading is carried out above 30 and 50 moving averages, which indicates the bulls' attempt to resume the upward trend.
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 1.2012 area. In case the pair falls, support will be provided by the lower border of the indicator at 1.1875.
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.
