To open long positions on EUR/USD, you need:
In yesterday's afternoon forecast, I drew attention to the 1.2174 level and recommended opening short positions from it. Let's take a look at the 5-minute chart and figure out what happened. The bears went beyond 1.2174, and the bulls made several unsuccessful attempts to regain this range, afterwards a signal to sell the euro was created, which pulled down the pair to the support area of 1.2130. For the sake of fairness, take note that if you missed the sale from 1.2174, then you did the right thing, since a couple of points were literally not enough before the real update of this level and its test from the bottom up. I also recommended opening long positions from the support of 1.2130, which brought about 30 points of upward correction to the middle of the US session.
This morning, buyers of the euro still need to think of a way to regain the 1.2174 level as soon as possible. There is a high likelihood that the euro could fall further as long as trading remains below this range. The absence of important fundamental reports in the first half of the day can play into the hands of sellers, therefore, being able to surpass and test the 1.2174 level from top to bottom will lead to a signal to open new long positions, in hopes for EUR/USD to rise to the resistance area of 1.2224, which is where the moving averages are located, on the side of sellers. Buyers will still aim for a high of 1.2281, where I recommend taking profits, however, you need a fairly good reason for such a large growth. If the bears continue to pull down the euro, I recommend not to rush into buying, but to wait until support at 1.2130 has been updated and form a false breakout there. It is best to open long positions immediately on a rebound from the low of 1.2083, counting on an upward correction of 20-30 points within the day.
To open short positions on EUR/USD, you need:
Euro sellers need to defend resistance at 1.2174. Being able to confidently test this area from the bottom up, similar to yesterday's sale, which I analyzed above, will result in forming a signal to open short positions in euros. It is important to understand that immediately when the 1.2174 level has been tested, the goal is for the pair to actively fall in order for it to reach support at 1.2130, where buyers will try to return to the market. An equally important task, amid the lack of fundamental reports on the eurozone countries in the morning, is to be able to go beyond and settle below 1.2130. Testing this level from the bottom up will open a direct road to the lows of 1.2083 and 1.2042, where I recommend taking profits. If sellers are not active after resistance at 1.2174 has been tested, it is best to refuse to sell at this level, since buyers might attempt to regain control of the market. In this case, you can take a closer look at short positions only after updating the resistance of 1.2224, or sell EUR/USD immediately on a rebound from the high of 1.2281, counting on a downward correction of 20-30 points within the day.
The Commitment of Traders (COT) report for January 5 recorded an increase in both long and short positions. Buyers of risky assets continue to believe in a bullish trend despite the euro's decline earlier this year, which will make it possible for new major players to enter the market. News on the ongoing vaccinations against the first strain of coronavirus in Europe will also support euro buyers. Pressure on the euro will come from isolation measures and quarantines in several European countries. Thus, long non-commercial positions rose from 222,443 to 224,832, while short non-commercial positions jumped from 78,541 to 81,841. Due to the larger increase in short positions, the total non-commercial net position decreased from 143,902 to 142,991 weeks earlier. The insignificant change in the delta at the beginning of the year is unlikely to indicate a change in the tactics of euro buyers, who count on bringing back the single currency's growth after the abolition of quarantine measures in the EU countries.
Trading is carried out below 30 and 50 moving averages, which indicates that the euro would decline further.
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 D1 daily chart.
A breakout of the lower border of the indicator around 1.2130 will increase pressure on the euro. A breakout of the upper border of the indicator in the 1.2174 area will lead to a new upward wave in the pair.
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.