Conditions for opening long positions on EUR/USD:
Yesterday, there were few signals to enter the market. Let us take a look at the 5-minute chart to analyze the market situation. Earlier today, I asked you to pay attention to the level of 1.0955 since today it is possible to enter the market from this level. Today, the market sentiment is quite positive and is boosting demand for risk assets. The current market situation was rather caused by the expectations of a fruitful dialog between Russia and Ukraine than by fundamental data. During the European session, the euro/dollar pair failed to go above 1.0955, thus forming a false break and a signal to sell the euro. However, the euro showed just a minor decline. Some time later, the pair resumed gaining in value, thus exceeding 1.0955. Unfortunately, the pair did not downwardly test the level (a blue line). In addition, traders did not receive a buy signal. In the second part of the day, the technical picture changed. The pair consolidated above 1.1004. Then, the price downwardly tested the mentioned level, providing traders with a buy signal. After that, the pair gained about 50 pips and touched 1.1052. To go above the mentioned level the pair lacked just 1-2 pips. That is why traders did not get any sell signal. During the US trade, the pair broke 1.1052 without an opposite test of the level. Only a false break of 1.1096 led to a sell signal. As a result, the correction totaled 25-30 pips.
Today, in the first part of the day, all eyes will be turned to the ECB meeting. No one expects changes in monetary policy and higher interest rates. Today's decisions made by the regulator will highly depend on inflation. Of course, the regulator takes into account core inflation, without prices of food and energy. The fact is that logistics difficulties caused by sanctions and a rapid rise in oil and gas prices may distort the real picture. It is quite possible that Christine Lagarde may provide some hawkish comments, causing a rise in the euro. Amid these expectations, the euro/dollar pair surged by 200 pips yesterday. Today, in the first part of the day, bulls should protect the support level of 1.1017. If the pair forms a false break of this level after a slight downward correction before the ECB meeting, traders will receive the first long signal, expecting a recovery to 1.1080, an intermediate resistance level. However, the pair needs to exceed 1.1080 to show a considerable rise. A downward test of the level and hawkish comments made by the ECB president are likely to give a buy signal. This, in turn, will provide the euro/dollar pair with a chance to recover 1.1139. If the pair manages to break this level, the bearish trend is likely to finish, allowing the pair to jump to new highs of 1.1184 and 1.1229, where it is recommended to lock-in profits. However, if Russia and Ukraine fail to come to a consensus, demand for the greenback may soar. In this case, it will be better to open long positions after a false break of the high of 1.0947. It is also possible to open long positions on the euro from 1.0879 and 1.0810, expecting the correction of 30-35 pips within one day.
Conditions for opening short positions on EUR/USD:
Bears are leaving the market, but the real reasons are still unclear. The fact is that today, the euro has a chance to fall, if Christine Lagarde chooses a more dovish stance today. Today, sellers of the euro should protect the resistance level of 1.1080. If the pair exceeds this level, demand is likely to rise. In case of a false break after the ECB meeting, traders will get a short signal with the target at 1.1017. The price may break and upwardly test this level very fast. This will provide traders with an additional short signal with the target at 1.0947 and 1.0879. The pair will be actively losing value due to a big number of stop orders set by buyers. The level of 1.0810 will act as the farthest target, where it is recommended to lock-in profits. However, such a massive sell-off will take place only amid very bad news from Ukraine. It is better to avoid short positions if the euro rises. If the ECB's president changes her rhetoric, bulls are likely to become more active. That is why it will be wise to open short positions amid a false break of 1.1139. It is possible to sell the asset from 1.1184 or 1.1229, expecting a change of 15-20 pips.
Commitment of Traders report
The COT report from March 1 unveiled a rise in both long and short positions. Under the current geopolitical situation, there is no use to describe investors' position since the market sentiment may change at any moment. The data published yesterday is of no importance today. No one knows how sanctions imposed by the EU and the US may affect the global economy. In addition, the Russia-Ukraine conflict may lead to various scenarios. The main question is how long it will last. Against the backdrop, the policies of the Fed and the ECB are of minor importance since markets will slump amid the deterioration of the Ukrainian conflict. Now, Russia and Ukraine are having talks. As a rule, a lot depends on the results of the negotiations. This week, the ECB will hold a meeting, whereas the US will disclose its inflation data for February. These events may cause a surge in volatility, but will hardly create favorable conditions for buyers of risk assets. I recommend that traders continue buying the greenback. Traders should be cautious choosing risk assets. It is possible to buy the euro only amid the alleviation of the tension between Russia, Ukraine, the EU, and the US. Any new sanctions against Russia will have grave economic consequences that will inevitably affect the financial market, including the euro. According to the COT report, the number of non-commercial long positions jumped from 214,195 to 228,385, whereas the number of non-commercial short positions increased to 163,446 from 154,163. The weekly close price dropped to 1.1214 from 1.1309.
Signals of indicators:
Moving Averages
Trading is conducted just below the 30- and 50-day moving averages, which indicates that bears are still controlling the market. .
Note: The period and prices of moving averages are considered by the author on the one-hour chart that differs from the general definition of the classic daily moving averages on the daily chart.
Bollinger Bands
If the price rises, the upper limit of the indicator located at 1.1110 will act as a resistance level. In case of a decline, the lower limit of 1.0975 will act a support level.
Description of indicators
Moving average (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 (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 is a total long position opened by non-commercial traders. Short non-commercial positions is a total short position opened by non-commercial traders. The total non-commercial net position is a difference between the short and long positions opened by non-commercial traders.