EUR/USD: trading plan for European session on March 31, 2022. Commitments of Traders and overview of yesterday's trades. Pressure on EUR may return

In my previous analysis, I paid attention to the 1.1134 level and said you could consider entering the market from it. Let's look at the 5-minute chart and try to figure out what actually happened. So, the price rose to 1.1134 during the European session and a false breakout produces a signal to sell the euro. The pair fell by 20 pips afterward. During ECB President Lagarde's speech, bulls managed to break above 1.1134 and retest the mark top-bottom, which made a strong buy signal. Eventually, the pair rose by 25 pips. During the North American session, a false breakout occurred at 1.1158. However, a mass sell-off of the euro did not happen, and the pair kept hovering around 1.1158 until the close of the trading day.

When to go long on EUR/USD:

President Lagarde said yesterday that Russia's actions are already posing serious risks to the eurozone economy. High energy and food prices, as well as supply issues, are likely to drive inflation further up in the future, making the European regulator take a hawkish stance on interest rates – a positive factor for the euro. Today, the eurozone macroeconomic calendar is full of important events that could affect the euro. Should inflation data in Germany and France beat the market forecast and the German labor market show significant growth, EUR/USD would head towards new monthly highs. However, before going long, make sure the MACD divergence shows the overbought market and the likelihood of a bearish correction. It would be wise to go long from 1.1146, in line with the bullish moving averages. A false breakout there would create a strong buy entry point. Bulls should increase their activity at 1.1180 if they want to extend the uptrend and break through March highs. It would become possible, should macro data in the eurozone come out strong. Today's statement by Philip Lane, a Member of the Executive Board of the ECB, could provide additional support to the pair. A breakout and a test of the 1.1180 level top-bottom would make a buy signal, allowing the pair to recover to 1.1227. This is where you could consider profit taking. A breakout there would trigger stop orders of sellers. In such a case, the quote could go further up with targets at the highs of 1.1271 and 1.1310. In the event of bearish momentum and a decrease in bullish activity at 1.1146, going long should better be postponed. You could open long positions after a false breakout at around 1.1113, in line with bullish moving averages. Long positions could also be entered on a bounce from 1.1074, or even lower, at around 1.1035, allowing a 30-35 bullish correction intraday.

When to go short on EUR/USD:

Bears are so far reluctant to return to the market. However, due to the MACD divergence, pressure on the euro could return at any moment. Today, bears will try to protect nearest support at 1.1180. It is a crucial level because, in the case of a false breakout there, pressure on the euro would increase, and a sell signal would be made with the target at intermediate support of 1.1146. Should the eurozone macro statistics come disappointing, it would trigger stop orders of buyers, pushing EUR/USD down to support at around 1.1113. An additional sell signal with targets at the lows of 1.1074 and 1.1035 would be made after a retest of the 1.1113 mark top-bottom. If so, you should consider profit taking at the target levels. In the event of bullish EUR/USD and a drop in bearish activity at 1.1180, the uptrend would continue. This is why those willing to sell the instrument should wait for the price to form a false breakout at around 1.1227. Short positions on EUR/USD could be entered on a bounce from 1.1271, or even higher, from 1.1310, allowing a 30-35 pips downward correction intraday.

Commitments of Traders:

The COT report from March 22 logged a drop in short positions and a steep rise in long ones. The fact that the pair is hovering around new yearly lows and major support levels has had a positive effect on the euro. Moreover, it was a minor fall in short positions. Pressure on EUR/USD came back last week due to hawkish Chairman Powell. Last Monday, Mr. Powell said there could be a 50 basis points rate hike at the upcoming FOMC meeting. Other members of the Committee were also hawkish, which made market participants revise their outlooks. The US regulator has to resort to such a measure in the face of high inflationary pressure. Meanwhile, President Lagarde said the ECB would take a more aggressive stance on monetary policy. It is a positive factor for the euro in the medium term as the currency is now heavily oversold against the US dollar. What is more, progress made during Russia-Ukraine peace talks and easing geopolitical tensions would provide support for EUR bulls. According to the COT report from March 22, long non-commercial positions increased to 207,051 from 202,040, and short non-commercial positions edged to 183,208 versus 183,246. As a result, the non-commercial net position grew to 23,843 from 18,794. The weekly closing price increased to 1.1016 versus 1.0942.

Indicator signals:

Moving averages

Trading is carried out above the 30-day and 50-day moving averages, indicating a bullish market.

Note: The period and prices of moving averages are viewed by the author on the hourly chart and differ from the general definition of classic daily moving averages on the daily chart.

Bollinger Bands

The lower band at 1.1130 stands as support. Resistance is seen at 1.1180, in line with the upper band.