To open long positions on EUR/USD, you need:
Last Friday, another ultra-low volatility in the market made it possible for us to obtain convenient entry points, but the market potential was not realized. Let's take a look at the 5 minute chart and break down the trades. A false breakout was formed in the resistance area of 1.1981 in the first half of the day, but after returning to the area below this level, the pair did not go down, although I am counting on a larger downward correction. After getting the pair to settle at this level in the second half of the day, the bulls managed to test this area from top to bottom, which created a point of entry into long positions, but we did not see any active growth above the monthly high of 1.1991 there either.
Important fundamental reports for the eurozone will not be released today. Considering how the market has been reacting to recent reports, practically ignoring it lately, I would not be surprised if we spend another day in the horizontal channel. The initial task of the bulls will be to protect support at 1.1946, which was already tested in today's Asian session. Forming a false breakout there at the beginning of the start of European session will result in creating a signal to open long positions in continuing the bullish trend. In this case, we can count on returning to resistance at 1.1991, where the market stopped again last Friday. Its breakthrough and consolidation above, with the test from top to bottom, creates a new entry point into long positions with the prospect of returning to 1.2047, where I recommend taking profits. The next target will be the high at 1.2109. If bulls are not active in the 1.1946 support area, then I recommend postponing long positions until the test of the larger 1.1916 area, from where you can buy EUR/USD immediately on a rebound, counting on an upward correction of 20-25 points within the day. The next support is seen around 1.1880.
To open short positions on EUR/USD, you need:
The bears' initial task for the first half of the day is to regain control of support at 1.1946. A disappointing report on the current account balance of the ECB balance of payments is unlikely to have a serious impact on the euro, but may serve as a reason for traders to build up short positions, since important fundamental reports will not be published today. Settling below the 1.1946 range and testing it from the bottom up creates an entry point for short positions, which will increase pressure on the pair and push it to the area of the 1.1916 low. In case the pair surpasses this range, you can further sell the euro in hopes that it would return to the 1.1880 support, where I recommend taking profits. If the euro is in demand this morning, and the eurozone report turns out to be much better than economists' forecasts, in this case, I recommend postponing short positions until a false breakout is formed in the resistance area of 1.1991. It is possible to sell EUR/USD on a rebound from a new large high of 1.2047, counting on a downward correction of 15-20 points within the day.
The indicators of long and short positions underwent a number of changes in the Commitment of Traders (COT) report for April 6, it revealed that the indicators of long and short positions significantly increased, which indicates that the bears are still in control of the market. Long positions continued to decline, which led to another drop in the positive delta. Last week we received a number of fundamental reports, but the International Monetary Fund's meeting grabbed more attention, at which a number of agreements were reached to extend the debt deferral program until the end of this year and an initiative was created to support the poor countries most affected by the coronavirus. Last week, there was also a lot of talk about the bureaucratic delay in the implementation of the EU Recovery Fund, which limits the euro's growth potential in the near future. For this reason, the market remains on the side of the sellers of risky assets in the medium term, which may lead to forming a succeeding downward trend. Investors expect the United States to be the first to start raising interest rates, which makes the dollar more attractive. This week's inflation data could seriously affect the balance of power in the market in favor of dollar bulls. One can expect an improvement in the economic outlook for the eurozone only when restrictions are lifted and the service sector is restored. This can also return the medium-term trend of strengthening EUR/USD and push it to an upward trend.
The COT report indicated that long non-commercial positions declined from 194,764 to 192,230, while short non-commercial positions rose from 121,024 to 124,708. As a result, the total non-commercial net position continued to decline and reached 67,522 against 73,739 a week earlier. But the weekly closing price rose to 1.1816 against 1.1768 last week.
Trading is carried out above 30 and 50 moving averages, which indicates a possible decline in the euro in the short term.
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.
Surpassing the upper border of the indicator in the area of 1.1991 will lead to a new wave of growth for the pair. Surpassing the lower border of the indicator around 1.1946 will increase pressure on the euro.
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.