A few entry signals were generated yesterday. Let's take a look at the M5 chart to get a picture of what happened. In my previous review, I focused on the 1.0533 level and considered entering the market there. The price dropped to the mark when the MACD divergence was forming, which I paid attention to yesterday. A false breakout through the level created a buy entry point, and the quote rose over 40 pips. After a false breakout through 1.0613 in the North American session, the pair dropped by 30 pips.
When to open long positions on EUR/USD:
A correction at the end of the month after such a steep drop makes sense. Demand for the euro may remain buoyant today. Due to an empty macroeconomic calendar, the greenback will unlikely find support. Meanwhile, more ECB officials give their remarks on interest rates. Only France's inflation and GDP data are scheduled for the first half of the day. In this light, a buy signal could be made after a fall and a false breakout through 1.0572, the middle of the sideways channel which is in line with bullish moving averages. The target is seen at the 1.0613 resistance. With macro stats coming upbeat in France, a breakout and a downside retest of the 1.0613 mark may create an additional buy entry point, targeting 1.0655. A breakout through 1.0655 could trigger a row of bearish stop orders and make an additional signal with the target at 1.0695 where I am going to lock in profits. If EUR/USD goes down and there is no bullish activity at 1.0572 in the European session, the bear trend will get stronger, and the pressure on the pair will return. A false breakout through support at 1.0533 will generate a buy signal. The trading plan will also be to buy on a rebound from the 1.0487 low, or even lower, at 1.0451, allowing a bullish correction of 30 to 35 pips intraday.
When to open short positions on EUR/USD:
Beras loosened their grip on the market, though the downtrend is still intact despite a correction. The trading plan is to sell after a false breakout through the nearest resistance at 1.0613 with the target at 1.0572, the middle of the sideways channel. A breakout and a retest of this range will make an additional sell signal, targeting 1.0533, where the bearish sentiment may increase. Consolidation below this range could push the quote to the area of 1.0487 where I am going to lock in profits. In case of growth in EUR/USD in the European session and the absence of the bears at 1.0613 on the back of the upbeat macro reports in France and the ongoing correction, the trading plan will be to open short positions after a false breakout at 1.0655. On a rebound, the instrument could be sold at the 1.0695 high, allowing a bearish correction of 30 to 35 pips intraday.
Commitments of Traders:
The COT report for January 31 logged a rise in long positions and a drop in short ones. Apparently, that happened before the decision of the Federal Reserve and the European Central Bank on interest rates. In fact, COT data from a month ago is of little interest at this point as it is not relevant due to the technical glitch the CFTC recently suffered. This week, there will be just a few interesting macro events. Therefore, the pressure on risk assets may ease somewhat. That may trigger a correction in EUR/USD. According to the COT report, long non-commercial positions increased by 9,012 to 246,755. Short non-commercial positions dropped by 7,149 to 96,246. Consequently, the non-commercial net position came in at 150,509 versus 134,349. The weekly closing price fell to 1.0893 from 1.0919.
Indicator signals:
Moving averages
Trading is carried out above the 30-day and 50-day moving averages, indicating a bullish initiative.
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
Resistance is seen at 1.0625, in line with the upper band. Support stands at 1.0565, in line with the lower band.
Indicator description:
Moving average (MA) determines the current trend by smoothing volatility and noise. Period 50. Colored yellow on the chart.Moving average (MA) determines the current trend by smoothing volatility and noise. Period 30. Colored green on the chart.Moving Average Convergence/Divergence (MACD). Fast EMA 12. Slow EMA 26. SMA 9.Bollinger Bands. Period 20Non-commercial traders are speculators such as individual traders, hedge funds, and large institutions who use the futures market for speculative purposes and meet certain requirements.Long non-commercial positions are the total long position of non-commercial traders.Non-commercial short positions are the total short position of non-commercial traders.Total non-commercial net position is the difference between the short and long positions of non-commercial traders.