To open long positions on EURUSD, you need to:
In my morning review, I paid attention to the level of 1.1835 and recommended actions based on it. The chart clearly shows how the bulls achieve a breakout of the support of 1.1835, after which there is an instant sell-off of the euro. It was extremely difficult to get into the market on such a move, so we had to wait for the test of this range from the bottom up. However, before the start of the second wave of decline in the euro, we returned to the level of 1.1835. A little later, it was completely broken by buyers, which moved the pair to another side channel, which we will discuss below.
Buyers seriously need to think about regaining control in the resistance area of 1.1843, as the further upward correction of the pair depends on this level. The task is complicated by the fact that just above this range, there are also moving averages that play on the side of sellers, which limit the upward potential of the pair. Only a break and a test of this level from top to bottom will lead to the formation of a signal to open long positions in the continuation of the upward correction with the main goal of returning to the resistance area of 1.1892, where I recommend taking the profits. If the activity of the bulls during the test of 1.1843 runs out, and the pressure on the euro returns in the second half of the day, I recommend opening long positions only when a false breakout is formed in the support area of 1.1804. I advise you to buy the euro immediately for a rebound only from the larger minimum of 1.1760, based on a rebound of 20-25 points within the day.
To open short positions on EURUSD, you need to:
The bears coped with the morning task and tried to break below the support of 1.1835, however, this did not lead to a major downward movement. At the moment, the technical picture has changed slightly: sellers need to protect the resistance of 1.1843, above which the moving averages pass. The formation of a false breakout there will lead to the formation of a signal to sell the euro already to reach the area of the minimum of 1.1804. The breakdown and test of this level from the bottom up, together with good fundamental data on activity in the US manufacturing and services sectors, will only increase the pressure on the pair, which will form a good sell signal in the continuation of the bear market. The target will be at least 1.1760, where I recommend fixing the profit. In the scenario of EUR/USD growth in the second half of the day above the resistance of 1.1843: the optimal scenario for opening short positions will be an update of the resistance of 1.1892, from where you can open short positions 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 March 15 clearly shows how there is a further sharp reduction in long positions, however, the growth of those who want to sell the euro is gradually slowing down. Despite this, the market remains on the side of sellers of risky assets, which may lead to further formation of a downward trend. This is confirmed by the chart of the fall of the euro, which we have been watching since the end of February this year. The sharp rise in the yield of ten-year US bonds plays in favor of the US dollar, as investors expect that the United States will be the first to start raising interest rates, which makes the dollar more attractive.
The recent meeting of the Federal Reserve once again convinced investors that the US economy is recovering much faster than expected, which increases the risk of an earlier inflationary jump. At the moment, it is best not to rush into buying euros but to wait for lower prices. Another factor of medium-term pressure on the euro is the repeated increase in the incidence of coronavirus in the eurozone countries and a weak vaccination program. Problems with the Astrazeneca vaccine do not add confidence to investors who are betting on a more active summer growth rate of the EU economy. Only after the lifting of restrictions and the restoration of the service sector can we expect an improvement in the economic prospects of the eurozone, which will return the medium-term trend to the strengthening of the EUR/USD. The COT report shows that long non-profit positions declined to 195,857 from 207,588, while short non-profit positions only rose from 105,624 to 105,881. As a result, the total non-commercial net position declined for the fifth week in a row to the level of 89,976 from the level of 101,964. The weekly closing price was 1.1926 against 1.1812 a week earlier.
Signals of indicators:
Trading is below 30 and 50 daily moving averages, which indicates that the euro will continue to decline 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.
If the pair grows in the second half of the day, the upper limit of the indicator in the area of 1.1860 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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