To open long positions on EUR/USD, you need:
Yesterday afternoon there was only one signal to sell the euro, but it was difficult to grab hold of it, especially if the pair moved spontaneously, amid US Treasury Secretary Janet Yellen's speech. Let's take a look at the 5 minute chart and understand the entry point. It is clearly seen how a false breakout in the area of resistance at 1.2035 can create a signal to open short positions. However, the downward movement took place on the same candlestick on which the signal was formed, so I personally did not have time to enter the market at such an attractive price. The dollar was in demand because Yellen began to suddenly talk about interest rates, as well as the fact that they need to be raised. There were no other signals to enter the market.
The technical picture of the pair has not changed in any way compared to yesterday, as trading was carried out mainly in a horizontal channel. Bulls will continue to defend the support for 1.2001, but this is very difficult to do - given today's reports. Traders will pay attention to the report on the activity of the service sector of the eurozone countries, which might have slightly fallen in some regions due to the introduction of a number of restrictions related to Covid. Only good reports and a false breakout at the level of 1.2001 will lead to a signal to open long positions in the expectation of an upward correction to resistance 1.2035. It is possible to talk about large buyers returning to the market only after a breakout and consolidation above 1.2035. A reverse test of it from top to bottom will create another signal to open long positions with the aim of an upward correction to the area of the high of 1.2074, where I recommend taking profits. The next target will be the level 1.2111. If EUR/USD is under pressure in the first half of the day, and the bulls are not active in the area of 1.2001, then I recommend postponing long positions until a larger low like 1.1964 has been updated, from where you can buy the euro immediately on a rebound, counting on an upward correction of 20-25 points within the day. The next big support is seen at 1.1925.
To open short positions on EUR/USD, you need:
The bears managed to defend the level of 1.2035 yesterday and limited the upward correction in the afternoon, but unfortunately they failed to cope with their main task. Only a breakthrough and a reverse test of the 1.2001 level from the bottom up can create an entry point for short positions with the goal of reaching the 1.1964 low, where I recommend taking profits. The next target is the area of 1.1925. Disappointing eurozone reports can turn this scenario into a reality. If the reports turn out to be better than the economists' forecasts, and the eurozone services sector shows growth even during the coronavirus pandemic: then you can count on short positions only in the resistance area of 1.2035, and then, subject to forming a false breakout there. If the bears are not active in the area of 1.2035, and the bulls manage to take this range for themselves, it is best to refuse to sell until EUR/USD reaches a new local high in the area of 1.2074. Selling the euro from this level can immediately bounce in anticipation of a downward correction of 20-25 points within the day. The next major resistance is seen at the 1.2111 high.
The Commitment of Traders (COT) report for April 27 showed that both short and long positions have increased, but there turned out to be more for the latter, which caused overall non-commercial positions to increase. This suggests that players actively buy the euro and one can bet that the pair will strengthen even more after the downward correction. The Federal Reserve's decision on interest rates and monetary policy did not significantly affect the US dollar rate, as well as the next programs proposed by US President Joe Biden to stimulate economic growth in the near future through changes in the tax system. Given that the Fed will continue to adhere to the previous course, even despite the sharp economic jump, risky assets will still be in demand after the decline in the EUR/USD pair earlier this month. The COT report indicated that long non-commercial positions sharply jumped from 197,137 to 200,415, while short non-commercial positions rose from 116,329 to 119,448, indicating an influx of new buyers that expect the euro to continue rising. The more the euro corrects to the downside at the beginning of this month, the stronger the demand is. As a result, the total non-commercial net position sharply rose from 80,808 to 80,967. The weekly closing price continued to rise to 1.20795 from 1.2042 a week earlier.
Indicator signals:
Trading is carried out in the area of 30 and 50 moving averages, which indicates the sideways nature of the market.
Moving averages
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 based on the indicator.
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.
