21.03.202213:19 Forex Analysis & Reviews: EUR/USD: trading plan for American session on March 21. Overview of morning trading. EUR stays flat

What is needed to open long positions on EUR/USD

In the morning article, I highlighted the level of 1.1063and recommended taking decisions with this level in focus. In the first half of the day, the euro was trading flat as bulls did not make attempts to push it higher. The lack of fundamental news and the failure to break above 1.1063 led to the formation of a false breakout and a sell signal. However, at the time of writing the article, the pair went down by about 20 pips. Yet, the pair avoided a sell-off. As for technical indicators, the pair has remained unchanged for the second half of the day

The euro is unable to continue its upward correction that started at the beginning of March this year due to the lack of fundamental news and a drop in geopolitical tensions. No fundamental reports are expected in the afternoon, which will keep the market volatility at a fairly low level. While trading will be conducted below the level of 1.1063, the pressure on the euro will remain. Therefore, if the pair falls, only a false breakout at 1.1007 will give the first entry point into long positions. The euro/dollar pair may perform a strong rise only if bulls help the pair break above the resistance level of 1.1063. Notably, the pair failed to do so in the first half of the day. The moving averages are passing in the negative territory. Given that there are no positive changes in the geopolitical situation in the world, demand for risky assets will be subdued. Only a breakout of 1.1063 and a test from top to bottom will give a buy signal and open the way to 1.1116. This is a strong resistance level that was formed at the end of last week. A more distant target level is a high of 1.1168 where I recommend profit-taking. A breakout of this level will limit the bearish trend and undermine the sellers' stop orders. As a result, the pair may grow the highs of 1.1227 and 1.1271. However, such a scenario is possible if there is news on the improving geopolitical situation in Ukraine. If the pair falls and bulls show no activity at 1.1007, it is better to postpone long positions. The optimal scenario for opening long positions would be a false breakout of a low of 1.0953. It is also recommended to open long positions on the euro immediately for a rebound from 1.0903, keeping in mind an intraday upward correction of 30-35 pips.

What is needed to short long positions on EUR/USD

The bears took the upper hand in the first half of the day. Yet, they need to protect the resistance level of 1.1063 as since there was no major sell-off from this level. This is a bad signal for those who are betting on a further fall of the pair. Only in the case of the formation of a false breakout at 1.1063, it is recommended to open short positions with the downward target at the support level of 1.1007. The bulls showed high activity near that level on Friday, trying to maintain an uptrend. There is also the lower border of the upward channel. Given that there are no important fundamental reports today, a breakout of this area may lead to a rise in stop orders from speculative traders who increased long positions last week after the Fed meeting. The test of 1.1007 from the bottom to top will give an additional sell signal with the prospect a decline to the levels of 1.0953 and 1.0903. A further target level will be a new low of 1.0855. If the euro advances and bears show no activity at 1.1063, the bulls will push the pair to new highs. In this case, it is better to postpone sales. It is advisable to open short positions in case of a false breakout of 1.1116. You can sell EUR/USD immediately on a rebound from 1.1168 or even higher high around 1.1227, keeping in mind an intraday downward correction of 15-20 pips.

COT report

The COT report from March 8 logs a sharp rise both in long and short positions. It is hardly surprising that the number of sellers advanced amid the special military operation in Ukraine. It decreased the negative delta. However, regardless of the euro's depreciation, buyers remain active amid the attractive price. Last week, the ECB held a meeting, thus bringing their policy to light. Its results boosted demand for risky assets. Christine Lagarde announced plans to switch to a more aggressive approach to QE tapering and the key interest rate hike. This is a strong strong bullish medium-term signal for euro buyers. However, investors should also pay attention to the Fed meeting. It is difficult to predict the regulator's actions given the highest inflation rate in the last 40 years. In addition, the negotiations between Russia and Ukraine have remained fruitless. That is why I recommend continuing to buy the greenback since the main trend of the euro/dollar pair is still bearish. The COT report revealed that the number of long non-commercial positions grew to 242,683 from 228,385, while the number of short non-commercial positions advanced to 183,839 from 163,446. At the end of the week, the total non-commercial net position declined to 58,844 against 64,939. The weekly closing price fell from 1.1214 to 1.0866.

Signals of technical indicators

Moving averages

EUR/USD is trading below 30- and 50-period moving averages. It means that the bears don't give up attempts to regain ground.

Remark. The author is analyzing a period and prices of moving averages on the 1-hour chart. So, it differs from the common definition of classic daily moving averages on the daily chart.

Bollinger Bands

In case of a rise, the 1.1063 level will act as resistance. A breakout of 1.1035 will lead to a larger sell-off of the euro.

Definitions of technical indicators

• Moving average recognizes an ongoing trend through leveling out volatility and market noise. A 50-period moving average is plotted yellow on the chart.
• Moving average identifies an ongoing trend through leveling out volatility and market noise. A 30-period moving average is displayed as the green line.
• MACD indicator represents a relationship between two moving averages that is a ratio of Moving Average Convergence/Divergence. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. A 9-day EMA of the MACD called the "signal line".
• Bollinger Bands is a momentum indicator. The upper and lower bands are typically 2 standard deviations +/- from a 20-day simple moving average.
• Non-commercial traders - speculators such as retail traders, hedge funds and large institutions who use the futures market for speculative purposes and meet certain requirements.
• Non-commercial long positions represent the total long open position of non-commercial traders.
• Non-commercial short positions represent the total short open position of non-commercial traders.
• The overall non-commercial net position balance is the difference between short and long positions of non-commercial traders.