Yesterday, traders received several signals to enter the market. Let us take a look at the 5-minute chart to figure out what happened. Earlier, I asked traders to pay attention to the level of 1.0777 to decide when to enter the market. A rise and a false breakout of this level led to a sell signal, which pushed the price lower by 20 pips. In the second part of the day, traders got a similar sell signal but the pair did not decline at all. A breakout and a downward test of 1.0777 gave a buy signal. As a result, the pair inched up by 20 pips.
Conditions for opening long positions on EUR/USD:
First of all, let us focus on the futures market and COT report. According to the COT report from March 21, the number of both long and short positions dropped. The Fed's meeting held in March affected the market situation. However, the US dollar is unlikely to slump since the regulator remained stuck to its policy. The aggressive approach of the ECB is the only fact that is supporting the euro at the moment. The central bank is planning to raise the key interest rate higher without altering its stance. Thus, the COT report unveiled that the number of long non-commercial positions decreased by 6,488 to 215,825, while the number of short non-commercial positions fell by 11,374 to 70,983. At the end of the week, the total non-commercial net position increased to 144,842 against 139,956. The weekly closing price rose to 1.0821 against 1.0803.
Today, the macroeconomic calendar is not rich in important events. That is why the euro is expected to go on rising amid the speeches that will be delivered by the ECB's officials. Thus, Member of the Governing Council of the ECB Joachim Nagel and ECB President Christine Lagarde will speak today. Their aggressive rhetoric may allow traders to open even more long positions, thus boosting the price above 1.0830. If the euro/dollar pair declines in the first part of the day, traders should be cautious when going long. It will be better to wait for a false breakout near a new support level of 1.0787 formed yesterday. In this case, the target will be located above the resistance level of 1.0830, which bulls failed to reach during the Asian trade. A breakout and a downward test of this level amid Christine Lagarde's hawkish comments may allow the pair to exceed 1.0874, giving hope for a higher rise to 1.0929, this month's high. The farthest target is located at the new high of 1.0964. The pair will be able to touch this level only amid weak data from the US. At this level, it is better to lock in profits. If the euro/dollar pair declines and buyers fail to protect 1.0787, which is also possible, pressure on the euro will return. In the event of this, only a false breakout near the next support level of 1.0751 will give a buy signal. Traders may also go long just after a bounce off the low of 1.0716 or even lower – at 1.0674, expecting a rise of 30-35 pips within the day.
Conditions for opening short positions on EUR/USD:
Bears have little chance to return to the market, especially amid comments of the ECB's officials and rising risk appetite. Today, bulls are likely to try to break above 1.0830 in the first part of the day. Sellers should primarily protect this area. A false breakout in the range after the ECB's comments will give a sell signal with the target at the nearest support level of 1.0797. A breakout and settlement as well as an upward test of this level will give an additional sell signal, which will affect buyers' stop orders and push the price to 1.0751. The pair may slide deeper only in the second part of the day. The target is located at 1.0716, where it is better to lock in profits. If the euro/dollar pair increases during the European session and bears fail to protect 1.0830, bulls will keep control over the market. In this case, traders should avoid selling until the price touches 1.0874. A false breakout of this level will give one more sell signal. Traders may also go short just after a rebound from the high of 1.0929 or even higher – at 1.0964, expecting a decline of 30-35 pips.
Signals of indicators:
Trading is performed above the 30- and 50-day moving averages, which points to a further rise in the pair.
Note: The author considers the period and prices of moving averages on the one-hour chart which differs from the general definition of the classic daily moving averages on the daily chart.
In case of a decline, the lower limit of the indicator located at 1.0760 will act as support. If the pair rises, it may face resistance at the upper limit of the indicator located at 1.0830.
Description of indicators
- Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart.
- Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph.
- MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9.
- Bollinger Bands. The period is 20.
- Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions are the total number of long positions opened by non-commercial traders.
- Short non-commercial positions are the total number of short positions opened by non-commercial traders.
- The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.