EUR/USD: plan for the European session on February 10. COT reports. US inflation will be the main driver of the movement of the EUR/USD pair

To open long positions on EUR/USD, you need:

Yesterday, quite a lot of profitable signals were formed to enter the market. Let's look at the 5-minute chart and figure out what happened. In my morning forecast, I paid attention to the level of 1.1403, and also advised you to make decisions on entering the market. The decline to this level in the first half of the day after the release of the data on Germany and France had forced bulls to defend this level once again, which resulted in forming a signal to open long positions. As a result, the growth was about 40 points, after which the bulls rested on the morning resistance of 1.1444. Forming a false breakout at this level resulted in creating a signal to open short positions. And although the downward movement was not quite large, around 20 points, there were three such signals in total during the US session, which is quite good.

Today is a very important day and the whole focus will undoubtedly be on US inflation data. However, before that, quite a lot of representatives of the European Central Bank will speak in the morning, and the economic forecast from the European Commission will also be published. Given that the bullish trend continues, even despite the bulls' failure at 1.1444 yesterday, it is still important to protect the nearest support of 1.1403 today. Forming a false breakout at this level during the speeches of ECB Executive Board member Frank Elderson, ECB Vice President Luis de Guindos and ECB Executive Board member Philip Lane - all this creates an excellent entry point into long positions in continuation of the upward trend. An equally important task is to regain control over the middle of the 1.1444 channel. Crossing this range and settling higher will help bulls gain confidence in their actions. A test of 1.1444 from top to bottom will lead to another buy signal and open up the possibility of a recovery to the area of this month's high at 1.1481. However, it is unlikely that the bulls will stop there, so a breakdown of this range will open a direct road to 1.1514 and 1.1562, where I recommend taking profits. We can count on such strong growth from the euro in the event of a slowdown in the rate of inflation in the United States in January this year. If the pair declines during the European session and there is no activity at 1.1403, it is best to postpone long positions to 1.1363. However, I advise you to open long positions there when forming a false breakout. You can buy the euro immediately for a rebound from the 1.1336 level, while counting on an upward correction of 20-25 points within the day.

To open short positions on EUR/USD, you need:

Bears are trying to offer something, and yesterday's protection at 1.1444 is proof of their willingness to act. Today, they have something to count on: data on inflation in the US and strong growth above the level of 7.3% y/y – all this is a very good signal for the euro's fall in the short term. In the first half of the day, in order to keep the pair in the horizontal channel, you need to try very hard not to miss its middle at 1.1444. Forming a false breakout there, by analogy with what I discussed above, will be a signal to open short positions in order to pull EUR/USD to the area of 1.1403. The breakdown of this area depends entirely on the market's reaction to the US inflation data, although the European Commission's forecast for the economy may also lead to a surge in market volatility. If we see an exit below 1.14003, a reverse test from the bottom up of this range will provide another signal to open short positions with the prospect of falling to large lows: 1.1363 and 1.1336. A more distant target will be the 1.1307 area. I recommend taking profits there. In case the euro grows and the bears are not active at 1.1444, it is best not to rush with short positions. The optimal scenario will be short positions when forming a false breakout in the area of 1.1481. You can sell EUR/USD immediately on a rebound from 1.1514, or even higher - around 1.1562, counting on a downward correction of 15-20 points.

I recommend for review:

The Commitment of Traders (COT) report for February 1 showed that both long and short positions had increased, and the latter turned out to be slightly more. This led to a slight reduction in the positive delta. However, it should be understood that the data does not take the European Central Bank meeting into account, at which its president Christine Lagarde made it clear to all market participants that the central bank will act more aggressively if the observed picture with inflation does not change.

As the latest data showed, there is no need to wait for a slowdown in inflationary pressure. This is a strong bullish signal to buy the euro at the moment, as there is a real prospect of a tighter monetary policy and an increase in interest rates in the eurozone this year. On the other hand, we should not forget about the Federal Reserve's increase in interest rates already in March this year, which will be some deterrent for EUR/USD bulls. Some traders expect that the central bank may resort to more aggressive actions and raise rates by 0.5% at once, rather than by 0.25% — this will become a kind of bullish signal for the US dollar. The COT report indicates that long non-commercial positions rose from the level of 213,408 to the level of 213,563, while short non-commercial positions jumped from the level of 181,848 to the level of 183,847. This suggests that traders continue to build up long positions, and the future report will clearly indicate a serious advantage in the bulls' direction, as it will take into account the February results of the ECB meeting. At the end of the week, the total non-commercial net position decreased slightly and amounted to 29,716 against 31,569. The weekly closing price also dropped, and amounted to 1.1229 against 1.1323 a week earlier.

Indicator signals:

Trading is conducted around the 30 and 50 day moving averages, which indicates market uncertainty with the further direction of the pair.

Moving averages

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.

Bollinger Bands

Crossing the lower limit of the indicator in the area of 1.1415 will lead to a larger drop in the pair.

Description of indicators