When to open long positions on EUR/USD:
Trading in the afternoon may be calmer as the economic calendar for the US is empty. The country celebrates Martin Luther King Day. A decline and a false breakout of 1.0810, similar to the one that occurred in the morning, could the bulls return the pair to the weekly high of 1.0857. Importantly, the price failed to settle above this level in the morning. A breakout and a downward retest of this level will generate a buy signal with the prospect of a rise to 1.0894. It may initiate the formation of a new bullish trend. A breakout of this level will also force the bears to close Stop Loss orders, providing an additional buy signal with a chance of an increase to 1.0931, where I recommend locking in profits. If EUR/USD declines and bulls show no activity at 1.0810 in the afternoon, the pressure on the pair will increase significantly. If so, it is better to pay attention to the support level of 1.0768 where only a false breakout will give a buy signal. You could buy EUR/USD after a bounce from a low of 1.0728 or 1.0687, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
The bears managed to protect the weekly highs. it means that there might be a correction in the afternoon. It is very important for bears to hold the pair below 1.0857 right now. As long as trading is carried out below this range, the likelihood of a rebound will remain high. If EUR/USD grows during the American session, it is better to open short positions after an unsuccessful consolidation above 1.0857. It could provide a sell signal, pushing the price to 1.0810. This level has already been tested today. A breakout and an upward test of this level will markedly undermine short-term bullish prospects, increasing pressure on the euro. It will also give an additional sell signal with a drop to 1.0768. A decline below this level will cause a steeper downward movement to 1.0728. If so, the bears are sure to take the upper hand. At this level, I recommend locking in profits. If EUR/USD rises during the American session and bears show no energy at 1.0857, I would advise you to open short positions only at 1.0894 after a false breakout. You could sell EUR/USD at a bounce from a high of 1.093, keeping in mind a downward intraday correction of 30-35 pips.
COT report
The COT report (Commitment of Traders) for January 3 logged a sharp drop in long and short positions. Traders preferred to long in profits at the start of the year due to the uncertainty over the future steps on monetary policy by the Fed and the ECB. Inflation has finally started to slow down. This is why they are expected to undertake less aggressive rate hikes. However, central banks will hardly make such a step. As a result, the likelihood of a recession in the global economy is extremely high. It may even begin this year. For this reason, demand for risky assets is subdued. Apart from that, the US inflation report is on tap soon. The Fed is sure to take inflation figures into account when making monetary policy decisions. Jerome Powell's speech this week is likely to be devoted to the Fed's fight against inflation. The COT report revealed that long non-commercial positions decreased by 29,344 to 222,543, while short non-commercial positions fell by 13,097 to 92,628. At the end of the week, the total non-commercial net position fell sharply and amounted to 129,915 against 142,279. Investors continue to open long positions on the euro betting on a policy reversal by main central banks this year despite the current risks. However, it needs new drivers for further growth. The weekly closing price dropped to 1.0617 against 1.0690.
Indicators' signals:
Trading is carried out near the 30 and 50 daily moving averages. It indicates a sideways movement of the pair.
Moving averages
Note: The period and prices of moving averages are considered by the author on the H1 (1-hour) chart and differ from the general definition of the classic daily moving averages on the daily D1 chart.
Bollinger Bands
If EUR/USD rises, the indicator's upper border at 1.0860 will serve as resistance.
Description of indicators
Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked green on the chart.MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9Bollinger Bands (Bollinger Bands). Period 20Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.Long non-commercial positions represent the total long open position of non-commercial traders.Short non-commercial positions represent the total short open position of non-commercial traders.Total non-commercial net position is the difference between the short and long positions of non-commercial traders.