To open long positions on EUR/USD, you need:
No signals for entering the market yesterday afternoon. If you look at the 5-minute chart, you will see that the bears tried to fall below the 1.2135 level, but there was no normal entry point to the market. As a result, I had to ignore the downward movement in the middle of the US session, which then resulted in active purchases of the euro at new lows. By the end of the day, the pair was in the resistance area of 1.2178 again. At the same time, trade is being conducted at the time of this writing. All this speaks in favor of bulls, which will continue to focus on surpassing 1.2178.
Fundamental reports that are not too important will be released in the first half of the day: the consumer confidence indicator and the volume of lending to the private sector of the eurozone are unlikely to seriously affect the market. However, in case we receive good indicators, one can count on the euro's succeeding growth. A breakout and being able to test the 1.2178 area from top to bottom creates an excellent signal to open long positions with the purpose of rising towards the area of the 1.2220 high, where I recommend taking profits. Another challenge is to update resistance at 1.2260. If the data does not meet economists expectations, then it is best for buyers to focus on protecting support at 1.2136. Forming a false breakout in that area creates a good entry point to long positions in hopes to continue the upward trend. If bulls are not active at this level, I recommend holding back from long positions until a low like 1.2093 has been tested, from where you can open long positions in EUR/USD immediately on a rebound, counting on an upward correction by 20-25 points within the day.
To open short positions on EUR/USD, you need:
The bears made an attempt to fall below the 1.2135 level yesterday and it seems that they managed to do so. However, the downward correction did not continue, which forced traders to quickly leave the market. I recommend opening short positions against the upward trend this morning in case a false breakout forms in the resistance area of 1.2178. Returning to the area below 1.2136 and testing it from the bottom up creates another point for entering the market with short positions in hopes to pull down EUR/USD. The breakdown of 1.2135 should weigh on EUR/USD and push the pair to the support area of 1.2093, where I recommend taking profits. The market's succeeding direction depends on this level, so a breakthrough of this range will lead to a reversal of the upward trend. If the euro is in demand in the first half of the day, and the bears are not active in the resistance area of 1.2178, then it is best to hold back from short positions until the test of a new high of 1.2220, from where you can sell EUR/USD immediately on a rebound for the purpose of pulling it down by 20-25 points within the day. The next major resistance is seen around 1.2260.
The Commitment of Traders (COT) report for February 16 revealed that there were no significant changes in the positions of large players, which once again indicates the temporary equilibrium of the pair before a new wave of growth this spring. The major decline from the previous week was won back, and this confirms the theory that the demand for the US dollar continues to decrease among investors. Therefore, a more correct approach to the market is to buy the euro for the medium term. A good factor for the euro would be the moment when European countries begin to actively roll back quarantine and isolation measures, and the services sector will start working in full force again, which will lead to an improved economic outlook and also strengthen the EUR/USD pair. The COT report indicated that long non-commercial positions rose from 220,943 to 222,895, while short non-commercial positions rose from 80,721 to 82,899. As a result, the total non-commercial net position slightly narrowed after rising to 140,006 from 140,222. The weekly closing price was 1.2132 against 1.2052 a week earlier, which indicates the presence of buyers in the market.
Trading is carried out just above the 30 and 50 moving averages, which indicates the buyers' attempt to continue growth.
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.
A breakout of the upper border of the indicator in the area of 1.2184 will lead to a new wave growth for the euro. In case the pair falls, support will be provided by the lower border of the indicator at 1.2125.
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.