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To open long positions on EUR/USD, you need:
Yesterday, quite a lot of signals were formed to enter the market. Let's look at the 5-minute chart and figure out what happened. In my morning forecast, I paid attention to the 1.1416 level, and also advised you to make decisions on entering the market. A decline and a false breakout in this range resulted in forming a good buy signal in continuation of the growth of the European currency, and the released fundamental data on the eurozone kept the chance of a breakthrough of EUR/USD to the daily highs and their breakdown. And so it happened: the pair updated the level of 1.1450 and got out to the area of 1.1460, but it was not possible to settle in this range. As a result, the movement is 45 points. Then in the afternoon it was possible to observe a false breakout at 1.1450, which led to a sell signal. As a result, the euro fell by 30 points. Trade remained within the horizontal channel.
Before we talk about the future prospects of the EUR/USD movement, let's look at what happened in the futures market and how the positions of Commitment of Traders have changed. The COT report (Commitment of Traders) for February 1 showed that both long and short positions had increased, and the latter turned out to be slightly more. This led to a slight reduction in the positive delta. However, it should be understood that the data does not take the European Central Bank meeting into account, at which its president Christine Lagarde made it clear to all market participants that the central bank will act more aggressively if the observed picture with inflation does not change.
As the latest data showed, there is no need to wait for a slowdown in inflationary pressure. This is a strong bullish signal to buy the euro at the moment, as there is a real prospect of a tighter monetary policy and an increase in interest rates in the eurozone this year. On the other hand, we should not forget about the Federal Reserve's increase in interest rates already in March this year, which will be some deterrent for EUR/USD bulls. Some traders expect that the central bank may resort to more aggressive actions and raise rates by 0.5% at once, rather than by 0.25% — this will become a kind of bullish signal for the US dollar. The COT report indicates that long non-commercial positions rose from the level of 213,408 to the level of 213,563, while short non-commercial positions jumped from the level of 181,848 to the level of 183,847. This suggests that traders continue to build up long positions, and the future report will clearly indicate a serious advantage in the bulls' direction, as it will take into account the February results of the ECB meeting. At the end of the week, the total non-commercial net position decreased slightly and amounted to 29,716 against 31,569. The weekly closing price also dropped, and amounted to 1.1229 against 1.1323 a week earlier.
Yesterday, trading was conducted mainly in a horizontal channel, and fundamental statistics did not allow the market to be seriously shaken. Apparently, a similar story will repeat itself today, as important data on the eurozone and the United States are not published. Bears will get a slight advantage if there is no bull activity at 1.1413 – this is the main focus in the first half of the day.
The optimal scenario for opening long positions will be a decline in the euro in the first half. Forming a false breakout at the level of 1.1413, by analogy with what I analyzed above, as well as good data on the balance of foreign trade in France and changes in the volume of retail trade in Italy - all this will lead to creating a signal to open long positions in hopes of resuming the upward trend formed last week. But, in addition, an active upward movement of the pair is also necessary. If the bulls are not able to offer anything when 1.1413 is tested, it is better not to rush with long positions. A breakthrough of this level may lead to a larger sell-off. In this case, I advise buying EUR/USD only after updating the next support at 1.1388. However, I advise you to enter the market only if a false breakout is formed. You can immediately open long positions for a rebound from the low of 1.1363, or even lower - around 1.1336 while hoping for an upward correction of 15-20 points within the day. An equally important task is to regain control of 1.1446, which they failed to do yesterday. A breakthrough and consolidation above this range, together with good data on the eurozone, will certainly increase risk appetite, which will create an excellent entry point for long positions in order to recover to the upper limit of the 1.1481 channel. Going beyond this range will return the bull market and lead to an update of the highs: 1.1514 and 1.1562, where I recommend taking profits.
To open short positions on EUR/USD, you need:
Bears are trying to take control of the market, there are very few willing to sell even at current highs. The optimal scenario for opening short positions this morning is when a false breakout forms at the level of 1.1446 – for example, you can take yesterday's short position from this range. This creates an excellent entry point into short positions with the prospect of EUR/USD falling to the lower border of the short-term horizontal channel at 1.1413. An active struggle may begin again for this level - if, of course, there is a real buyer in the market. Weak data on the eurozone countries, together with a breakthrough and a reverse test from the bottom up of this range, will create another signal to enter the market, which will push the pair to a low of 1.1388 and open a direct road to 1.1363. A more distant target will be the 1.1336 area, where I recommend taking profits. A test of this level will negate all the bulls' efforts to build a bullish market. If the pair recovers during the European session and bears are inactive at 1.1446, the optimal scenario will be selling when a false breakout is formed in the area of 1.1481. It is possible to open short positions on EUR/USD immediately on a rebound from the highs: 1.1514 and 1.1562, counting on a downward correction of 15-20 points.
Indicator signals:
Trading is conducted below the 30 and 50 moving averages, which indicates an attempt by the bears to continue the downward correction.
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
A breakthrough of the upper limit of the indicator in the area of 1.1446 will lead to an increase in the euro. Crossing the lower limit of the indicator in the area of 1.1413 will increase the pressure of the pair.
Description of indicators
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