Yesterday, traders received a lot of signals to enter the market. Let us take a look at the 5-minute chart to analyze the market situation. Earlier, I asked you to pay attention to the levels of 1.0515 and 1.0551 to decide when to enter the market. During the European session, the euro/dollar pair returned to 1.0515 and then downwardly tested this level, giving a perfect buy signal with the target at 1.0551. As a result, the pair increased by about 30 pips. The expected false break of 1.0551 led to a sell signal, thus resulting in a massive sell-off. As a result, the pair broke 1.0515, giving traders another 30 pips of profit. During the US trade, bears took control over 1.0527. An upward test of this level led to a good sell signal, which pushed the pair to 1.0486, giving 40 pips of profit. We saw two false breaks of 1.0486, which gave a sell signal. Given weak US GDP data, the trade brought 30 pips. At the end of the US trade, bears showed high activity near 1.0527, providing traders with one more sell signal. Because of this, the pair dropped by 25 pips.
Conditions for opening long positions on EUR/USD:
A sharp drop in the US GDP of 1.4% in the first quarter disappointed traders. However, the influence on the US dollar was insignificant. Notably, in the previous quarter, the economy expanded by 6.9%. Today is the last trading day of the month. Taking into account the current trading week, we can assume that traders will start to lock-in profits, thus causing a sharp rise in the pair. Traders are likely to rely on the GDP data from the eurozone and retail sales reports. Inflationary pressure in the eurozone, which is expected to go on rising in April, will also be taken into account. Today, buyers should primarily protect the level of 1.0516. It will be better to open long positions from this level only after a false break and expectations that bulls will regain control over the market. Since the pair may hit the bottom, it has a chance to jump to 1.1557 and test 1.0588. However, it will be really difficult to exceed this level. Only in case of strong GDP data from the eurozone, the pair will be able to break and downwardly test 1.0551 and 1.0588, thus giving a buy signal. Thus, the pair will have a chance to return to 1.0621, where it is recommended to lock in profit. In case of a drop and buyers' failure to protect 1.0516, traders should avoid opening long positions. It will be wise to go long after a false break of 1.0477. It is also possible to open buy order from 1.0426 or lower – from 1.0394, expecting a rise of 30-35 pips.
Conditions for opening short positions on EUR/USD:
Sellers are still controlling the market. However, the number of those who want to sell at the current lows has slumped amid yesterday's statistical data. Be careful opening sell orders, especially if you do not use stop orders. To keep control of the market, sellers should push the price to a new yearly low below 1.0477. Before that, they also should be active near the support level of 1.0516. Traders may open short orders after a false break of 1.0557 with the target at 1.0516. Since the pair is rapidly approaching 1.0557, in the first part of the day bears will try to protect this level. Only extremely weak data on the eurozone economic growth and a surge in inflationary pressure will allow the pair to break and settle below 1.0516. An upward test will give a sell signal with the target at a yearly low near 1.0477. If this scenario comes true, the price may slide to 1.0426, where it is recommended to lock in profit. A farther target is located at 1.0394. However, this scenario will become possible only in case of a bullish reaction to the US data. If the euro increases in the first part of the day and bears fail to protect 1.0557, the price may show a jump. In this case, it will be better to open short positions after a false break of 1.0588. Traders may also go short from 1.0621 or higher – from 1.0652, expecting a decline of 25-30 pips.
COT report
According to the COT report from April 19, the number of short positions jumped, whereas the number of long positions dropped. The recent comments provided by representatives of central banks led to a massive sell-off of risk assets. The central banks' officials made it clear that developed economies are likely to face grave problems this year. Although the ECB president emphasizes that the regulator is planning to close its asset-purchasing program by the end of the second quarter, it is not enough to support the euro. The Fed's more aggressive policy and its intention to raise the benchmark rate by 0.75% in May are supporting the greenback. In addition, global economic slowdown could be caused by quarantine measures imposed in China to curb the new virus wave. Such actions have already led to serious disruptions in supply to European and Asian countries. Against the backdrop, demand for the US dollar remains very high, thus pushing the euro/dollar pair lower. Military actions in Ukraine are also exerting pressure on the euro. The COT report unveiled that the number of long non-commercial positions dropped to 221,003 from 221,645, while short non-commercial positions surged to 189,702 from 182,585. The decline in the euro makes it more attractive for investors. At the end of the week, the total non-commercial net position decreased to 34,055 against 39,060. The weekly closing price collapsed to 1.0814 against 1.0855.
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 number of long positions opened by non-commercial traders. Short non-commercial positions is a total number of short positions opened by non-commercial traders. The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.