EUR/USD: trading plan for US session on March 28 (morning trades analysis). Euro remains in trading channel and may decline soon

Long positions on EUR/USD:

In my forecast this morning, I drew your attention to the level of 1.0972 and recommended entering the market from this level. Let's have a look at the 5-minute chart and analyze what happened. The lack of fundamental statistics led to a small spike in volatility in the first half of the day. However, the pair broke through and fixed above 1.0972. The top/bottom test of that level created a good entry point into long positions, but it failed to rise more than 20 pips. When the forecast for the second half of the day was made, bears tried to gain control of 1.0972, which caused a complete revision of the technical picture.

During the US session, traders are waiting for not-so-important data on Goods Trade Balance in the US, as well as the change in the volume of stocks in the Wholesale Inventories. The current indicators are not very important for the market and traders, who are now fully focused on inflation and the actions of the Federal Reserve, as well as on geopolitical events. At the beginning of this week, there will be another meeting of representatives of Russia and Ukraine and traders expect the process of negotiations to move forward. This may give confidence to buyers of risky assets. In the second half of the day, bulls need to hold the price above new support at 1.0948. After the release of macroeconomic data, the pair may start decreasing, but only a false breakout is likely to give the first signal for opening long positions. In this case, it is possible to count on the upside movement with the target to return to the area of 1.0997. A test of this level can generate a buy signal and open the way to the pair's recovery to 1.1036, which was the upper boundary of the trading channel of the previous week. The next target is this month's high at 1.1069, where traders may lock in profits. A breakthrough at this level will cancel the bearish trend and trigger sellers' stop-loss orders, opening a direct way to the high of 1.1116. If the pair falls and there is a lack of activity from bulls at 1.0948, it is better to postpone the opening of long positions. A false breakout of the low at 1.0903 would be the best buy scenario. It would also be better to open long positions on the rebound from 1.0855, allowing an upward intraday correction of 30-35 pips.

Short positions on EUR/USD:

Bears prevented a more aggressive upward movement of the pair in the first half of the day. As long as the trading is carried out below 1.0997, nothing threatens them. After the US data release the pair might rise, and the formation of a false breakout at that level may lead to the first sell signal, followed by the decline to support at 1.0948. A retest to this range could seriously hurt the bulls' plans, forcing them to let the pair go lower. A breakout and a reverse retest of 1.0948 would give an additional signal to go short, with the potential of declining to a low at 1.0903. A more distant target is at 1.0948, where traders may take a profit. If the euro rises and there is a lack of activity from bears at 1.0997, bulls are likely to continue to open long positions, counting on a return of the pair to the monthly highs. Taking into account that much will depend on the further development of geopolitical events, it is better not to bet on the growth of the euro. It would also be better not to rush selling the currency. Opening of short positions at a false breakout at 1.1036 would be the best option. Selling the pair on the rebound is possible from 1.1069, or higher near 1.1116, allowing a downward correction of 20-25 pips.

The COT (Commitment of Traders) report for March 15 showed a decrease in both long and short positions. However, if you look at the readings, you may notice that there was a slight reduction in short positions. Long positions decreased considerably. It was not surprising, against the background of the Russian special military operation in Ukraine. The Federal Reserve meeting was the central event of last week. As a result, the FOMC raised interest rates by 0.25%, which did not lead to serious changes in the market, as many had expected such a decision. Fed Chairman Jerome Powell took a wait-and-see approach during his speech, failing to signal a more aggressive policy, which triggered a build-up of long positions in risky assets. However, at the beginning of this week, the Fed Chairman changed his approach saying in the interview that there was a high probability to raise the interest rate by 0,5% just at the following FOMC meeting. This was a strong bullish signal for the US dollar which is likely to continue its growth against the euro. Recently, the European Central Bank also held a meeting. President Christine Lagarde announced the ECB's plans for a more aggressive tapering of economic support measures and interest rate hikes. It was good for the medium-term outlook of the European currency, which is already heavily oversold against the US dollar. The COT report showed that long non-commercials fell to 202,040 from 242,683, while short non-commercials decreased to 183,246 from 183,839. At the end of the week, total non-commercial net positioning was down to 18,794 against 58,844. The weekly closing price rose slightly to 1.0942 from 1.0866.

Indicator signals:

Moving averages

Trading is carried out below the 30- and 50- day moving averages, indicating a possible decline of the euro.

Note: Period and prices of moving averages are considered by the author on hourly chart H1 and differ from the general definition of classic daily moving averages on daily chart D1.

Bollinger Bands

In the case of growth, the upper boundary of the indicator in the area of 1.0997 will act as resistance. A breakthrough of the lower boundary at 1.0948 will cause a larger sell-off in the euro.

Description of indicators