FX.co ★ EUR/USD: trading plan for American session on February 24 (overview of morning trade). Bulls creeping towards resistance at 1.2178, though lacking new target levels

What is needed to open long positions on EUR/USD

In the first half of the day, I pointed your attention to the resistance level of 1.2178 in the hope of opening new short positions from there. Now let's look at a 5-minute chart and discuss what has actually happened. Unfortunately, a fake breakout at near 1.2167 has taken shape. So, I missed selling opportunities with the euro's move downwards. The currency pair is now trading under low volatility amid the lack of fundamental data. The market will set in motion in the second half of the day as investors will be alert to a testimony of Jerome Powell. Oddly enough, Germany's GDP data turned out to be better than expected but it didn't change trading sentiment much.

From the technical viewpoint, nothing has changed. Importantly, the market will focus on the second testimony of Fed's Chairman Jerome Powell before the Congressional Committee and a report on new home sales in the US. Upbeat sales could step up pressure on EUR. So, the buyers should think well how to protect support of 1.2135. If a fake breakout is formed there, traders will find a good market entry point with long positions amid prospects of a further uptrend. In case the bulls lack activity at this level, it would be better to cancel opening long positions until a low of 1.2093 is tested. From there, it would be possible to buy EUR immediately at a bounce, bearing in mind a 20-25 pips upward correction intraday. Today an equally important task for the bulls is to push the price up again to a one-month high of 1.2178. If this area is tested downwards, traders will find an excellent signal for a market entry with long positions reckoning prospects of a further climb to 1.2220 where I recommend profit taking. A more distant task for the bulls is to make a higher resistance after 1.2260.

What is needed to open short positions on EUR/USD

The first half of the day was unfolding like yesterday. The price again missed the opportunity to form a fake breakout at near resistance of 1.2178. I would recommend opening short positions in the second half of the day against the uptrend only in case a fake breakout is formed in this area. The nearest target is seen at 1.2135. Importantly, only its test upwards creates a convenient market entry point with short positions, reckoning a further decline of EUR/USD. Solid fundamental data from the US and remarks of Fed's Chairman Jerome Powell could reinforce the US dollar. A breach of 1.2135 will drag down EUR/USD rapidly to support of 1.2093 where I recommend profit taking. This level will determine a further trajectory of the currency pair. Hence, make sure you trade with caution there. A breakout of this level will ruin the uptrend. If EUR again enjoys demand in the second half of the day and the bears don't reveal any activity at near resistance of 1.2178, it would be better to postpone short positions until the pair makes a higher high after 1.2220. From there, you will be able to sell EUR/USD immediately at a bounce, bearing in mind a 20-25 pips downward correction intraday. The next major resistance is seen at about 1.2260.

Let me remind you that the COT report (Commitment of Traders) from February 16 didn't log a notable change in positions of large market players. This proves the equilibrium of EUR/USD before a new wave of advance in the spring this year. Market participants have already reacted to another steep decline last week. This proves the common stance that the US dollar is losing favor with investors. Therefore, the right trading decision would be buying EUR in the medium term. The euro is likely to receive solid support when the authorities in European countries will eventually ease restrictions and cancel the stay-home directive. In this context, the service sector will get back on track that will improve EU economic prospects and prop up EUR/USD.

According to the COT report, long non-commercial positions increased from 220,943 to 222,895. At the same time, short non-commercial positions rose from 80,721 to 82,899. As a result, the overall non-commercial net positions dropped a bit to 140,006 from 140,222 a week ago. The EUR/USD pair closed the week at 1.2132 versus 1.2052 on the previous week. This indicates that the buyers are holding the upper hand in the market.

Signals of technical indicators

Moving averages

The pair is trading at about 30- and 50-period moving averages. This indicates a pause in the market before keynote speeches of top officials of global central banks.

Remark. The author is analyzing a period and prices of moving averages on the 1-hour chart. So, it differs from the common definition of classic daily moving averages on the daily chart.

Bollinger Bands

The pair is trading with very low volatility that does not generate any signals of market entry.

Definitions of technical indicators

• Moving average recognizes an ongoing trend through leveling out volatility and market noise. A 50-period moving average is plotted yellow on the chart.
• Moving average identifies an ongoing trend through leveling out volatility and market noise. A 30-period moving average is displayed as the green line.
• MACD indicator represents a relationship between two moving averages that is a ratio of Moving Average Convergence/Divergence. The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. A 9-day EMA of the MACD called the "signal line".
• Bollinger Bands is a momentum indicator. The upper and lower bands are typically 2 standard deviations +/- from a 20-day simple moving average.
• Non-commercial traders - speculators such as retail traders, hedge funds and large institutions who use the futures market for speculative purposes and meet certain requirements.
• Non-commercial long positions represent the total long open position of non-commercial traders.
• Non-commercial short positions represent the total short open position of non-commercial traders.
• The overall non-commercial net position balance is the difference between short and long positions of non-commercial traders.