To open long positions on EURUSD, you need to:
In my morning forecast, I paid attention to the resistance of 1.2224 and recommended opening short positions from it. The 5-minute chart clearly shows how the bulls are approaching the above level, after which a major sale of the euro begins to the level of 1.2179, where the pressure on EUR/USD has decreased. Such a sharp collapse of the euro, after a similar incomprehensible sharp increase yesterday towards the end of the US session, returned the balance to the market and now the bulls need to try to resume the upward correction.
Good data on the volume of industrial production in the eurozone were ignored because they were released in November 2020. Now the bulls will again have to think about how to regain the level of 1.2179. The focus will likely be placed on the report on inflation in the United States, which may be worse than economists' forecasts. However, as long as the trade is conducted below 1.2179, the probability of continuing further fall of the euro will be quite high. A breakdown and test of this level from top to bottom will lead to the formation of a signal to open new long positions to grow EUR/USD to the resistance area of 1.2224. This scenario is implemented if inflation in the United States does not show the expected growth. The longer-term target of buyers remains a maximum of 1.2281, where I recommend fixing the profits. If the bears continue to push the euro down, I recommend that you do not rush to buy, but wait for the support update of 1.2138 and open long positions from there immediately for a rebound with the aim of an upward correction of 20-30 points within the day.
To open short positions on EURUSD, you need to:
Sellers of the euro perfectly coped with the task of protecting the resistance of 1.2224 and are now trying to gain a foothold below the level of 1.2179. The test of this level from the bottom up has already occurred, which led to the formation of a signal to sell the euro and while trading will be conducted below this range, you can count on a further decline in the pair. As noted, much will depend on the US inflation data. Good indicators can lead to a further fall in EUR/USD, and the target of the decline will be the support of 1.2138, where I recommend fixing the profits. A break of the level of 1.2138 and its test from the bottom up will form another good signal for opening short positions, which will clear the way to the lows of 1.2083 and 1.2042, where I recommend fixing the profits. If the pair returns to the level of 1.2179 in the second half of the day, it is best to abandon sales before the resistance update of 1.2224 or sell EUR/USD immediately on the rebound from the maximum of 1.2881 in the expectation of a downward correction of 20-30 points within the day.
Let me remind you that the COT report (Commitment of Traders) for January 5 recorded the growth of short positions and the growth of long positions. Buyers of risky assets continue to believe in a bullish trend even despite the decline of the European currency at the beginning of this year, which will allow new major players to enter the market. News that vaccination against the first strain of coronavirus continues in Europe will also support euro buyers. Pressure on the euro will be exerted by isolation measures and the current quarantine in many European countries. Thus, long non-commercial positions rose from 222,443 to 224,832, while short non-commercial positions jumped to 81,841 from 78,541. 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 hardly indicates a change in the tactics of buyers of the European currency, who are counting on the resumption of euro growth after the lifting of quarantine measures in the EU countries.
Signals of indicators:
Trading is conducted around 30 and 50 daily moving averages, which indicates some market uncertainty.
Note: The period and prices of moving averages are considered by the author on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1.
A break of the lower limit of the indicator in the area of 1. 2167 will lead to a new wave of decline in the euro. Growth will be limited by the upper level of the indicator in the area of 1.2230.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence / divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit 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 the short and long positions of non-commercial traders.