When to open long positions on EUR/USD:
In my morning article, I turned your attention to 1.0684 and recommended making decisions with this level in focus. Now, let's look at the 5-minute chart and figure out what actually happened. A sharp jump in the morning led to a false breakout of 1.0684. After that, the euro declined by more than 20 pips. However, it failed to reach the support level of 1.0645. For the afternoon, the technical outlook has not changed as well as the strategy.
Bulls may try again to push the pair above 1.0684 amid the lack of crucial economic reports. There is still a chance of a larger upward correction. However, in the afternoon, Fed policymakers, including Board of Governor Member Michelle Bowman will deliver speeches. If their rhetoric is hawkish, it may adversely affect the trajectory of the euro. If the pair drops, I would advise you to open long positions only a false breakout of a weekly low of 1.0645 with the prospect of a rise to 1.0684 formed last Friday. A breakout and a downward retest of this level on the second attempt could give form a buy signal with a jump to 1.0716. At this level, the moving averages are benefiting bears. A breakout of this level will also force bears to close their Stop Loss orders. It will create new entry points into long positions. The pair may grow to 1.0750 where I recommend locking in profits. However, the pair is unlikely to climb significantly today. If EUR/USD declines and buyers show no activity at 1.0645 in the afternoon, bulls will hardly be able to regain the upper hand. In this case, investors should pay attention to the support level of 1.0601. Only a false breakout of this level will give a buy signal. You could buy EUR/USD at a bounce from a low of 1.0565 or 1.0525, keeping in mind an upward intraday correction of 30-35 pips.
When to open short positions on EUR/USD:
As long as trading is carried out below 1.0684, the pair will keep declining. It would be wise to open short positions at 1.0684. Before opening short positions, make sure that large traders have entered the market by analogy with how it was during European trading. One should wait for a rise and a false breakout. US macro stats and hawkish comments of Fed policymakers will return pressure on the euro, which will give a sell signal. The pair may dip to a low of 1.0645. A breakout and an upward retest of this level will create new entry points into short positions with a fall to 1.0601. It may facilitate a bear market. A drop below this level in the afternoon may cause a more significant downward movement to 1.0565. At this level, I recommend locking profits. If EUR/USD rises during the American session and bears show no activity at 1.0684, the bulls will make an attempt to push the pair higher. Therefore, the pair could slip into the sideways channel. In this case, I advise you to postpone short positions until a false breakout of 1.0716. You could buy EUR/USD at a bounce from a high of 1.0750, keeping in mind a downward intraday correction of 30-35 pips.
COT report
The COT report for January 24 logged a rise in both short and long positions. Traders have significantly increased long positions following hawkish speeches of ECB policymakers. They are betting on further monetary tightening by the ECB and the Fed's dovish stance. The US regulator may reduce the pace of tightening for the second time in a row. Weak macro stats on the US economy, namely a drop in retail sales and a slowdown in inflation may force the central bank to take a pause in rate hikes to avoid any damage. This week, several central banks will hold their meetings. Their results will eventually determine the trajectory of the euro/dollar pair. According to the COT report, long positions of the non-commercial group of traders increased by 9,464 to 237,743 while short positions advanced by 2,099 to 103,394. At the end of the week, the total non-commercial net position rose to 134,349 from 126,984. It appears investors believe in the upside potential of the euro. Nevertheless, they are waiting for more clues from central banks regarding interest rates. The weekly closing price grew to 1.0919 from 1.0833.
Indicators' signals:
Trading is carried out below the 30 and 50 daily moving averages, which indicates that bears remain in control.
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 declines, the indicator's lower border at 1.0660 will serve as support.
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.