To open long positions on EURUSD, you need to:
In the first half of the day, one signal for the sale of the European currency was formed, as it was not possible to wait for the formation of a false breakdown from the level of 1.2005. Let’s look at the 5-minute chart and analyze the entry point. It can be seen that nothing sensible happened at the level of 1.2005 for buyers. A normal false breakout with a return to 1.2005 also failed to wait. And after weak statistics on retail sales in the euro area, the pressure on the pair returned. The consolidation and bottom-up test of the level of 1.2005 formed a good entry point into short positions. However, there was no major downward movement and the drop was only 20 points.
The goal of the bulls for the second half of the day will be to return to the control of the resistance of 1.2005, which they missed during the European session. However, before talking about the growth of the euro, the bulls will need to make every effort to prevent a new wave of decline, which may occur after the release of fundamental data on the US labor market and the level of production orders. Only weak reports will lead to a return to the level of 1.2005, the test of which from top to bottom forms an excellent entry point into long positions in the expectation of a recovery in the area of the morning high of 1.2042, where the moving averages pass. In the same place, I recommend taking profits, since a more powerful upward trend from this level can hardly be counted on. In the event of a further fall in the euro, I recommend postponing long positions until the test of a new annual low in the area of 1.1965, from which you can open long positions immediately on the rebound in the expectation of an upward correction of 20-25 points within the day.
To open short positions on EURUSD, you need to:
Sellers of the euro coped with the morning task and took control of the level of 1.2005. As long as trading is conducted below this range, the pressure on the euro will remain quite high. The next formation of a false breakout at this level in the second half of the day, which may occur after the publication of statistical data on the US economy, forms a signal to sell the euro in the continuation of the bear market. In this case, the nearest target will be a new low of 1.1965. Its breakout forms another signal for the sale of the euro already with the exit to the support of 1.1923, where I recommend fixing the profit. In case of recovery of EUR/USD after weak US data and lack of activity in the resistance area of 1.2005, the upward correction for the euro can be strengthened, so I recommend not to rush with sales. The optimal scenario is to open short positions after updating the resistance at 1.2042, where the moving averages are playing on the side of the bears. You can open short positions from this level immediately for a rebound in the expectation of a downward correction of 20-25 points within the day.
Let me remind you that the COT report (Commitment of Traders) for January 26 recorded a sharp increase in long positions and a reduction in short ones. The incoming data limits the upward potential of the euro, as does the fact that vaccination in the euro area will take place at a slower pace than expected. This is sure to affect GDP for the 1st quarter of this year, however, it is unlikely to seriously affect the medium-term prospects for the recovery of EUR/USD. With each significant downward correction of the pair, the demand for the euro returns, and the lower the rate, the more attractive it will become for investors. The prospect of lifting the quarantine will keep the market positive in the future. However, the risk of extending the quarantine measures in February of this year is still a deterrent to the growth of the euro. The COT report shows that long non-profit positions increased from the level of 236,533 to the level of 238,099, while short non-profit positions decreased from 73,067 to the level of 72,755. Due to the continued growth of long positions, the total non-commercial net position rose to 165,344 from 163,466 a week earlier.
Signals of indicators:
Trading is below 30 and 50 daily moving averages, which indicates a fall in the euro in the short term.
Note: The period and prices of the 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 1.1980 will increase the pressure on the euro. If the euro rises, the upper limit of the indicator around 1.2050 will act as a resistance.
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.
The material has been provided by InstaForex Company – www.instaforex.com
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