FX.co ★ Outlook for EUR/USD for European session on March 21. COT report. EUR drops against USD, but still has chance to rise

Conditions to open long positions on EUR/USD:

On Friday, there were no signals to enter the market despite favorable market conditions. Let us take a look at the 5-minute chart to analyze the market situation. Earlier, I asked you to focus on the level of 1.1045 to decide when to enter the market. In the first part of the day, buyers of the euro showed very tepid activity. A failure to touch the bottom of pattern 11 forced bulls to leave the market. As a result, the euro declined to the support level of 1.1045. However, big market players did not manifest any interest and allowed the pair to settle below the mentioned level. In addition, the price failed to upwardly break 1.1045. As a result, sellers did not receive a signal to enter the market. To touch the next support level, the pair needed just 2 pips. This could have also provided traders with a short signal.

Today, countries will hardly publish any data that may cause a surge in volatility. The pair is likely to trade within a narrow range around 1.1063. It is possible that bears will try to push the pair lower to the support level of 1.1007. A false break of 1.1007 will give the first long signal. However, to jump, the euro/dollar pair should break the resistance level of 1.1063.Since the geopolitical situation remains the same, demand for risk assets will be limited. Only a downward signal of the level will provide traders with buy opportunities, thus allowing the pair to recover to 1.1116, a strong resistance level that was formed at the end of the previous week. A farther target is located at the high of 1.1168, where it is recommended to lock in profit. A break of the range may change the market sentiment, allowing the pair to climb to such highs as 1.1227 and 1.1271.However, the scenario will come true only amid good news about the geopolitical situation. If the pair declines and bulls fail to protect 1.1007, traders should avoid long positions. It will be better to open long positions after a false break of the low of 1.0953. It is also possible to go long from 1.0903, expecting a rise of 30-35 pips within one day.

Conditions to open short positions on EUR/USD:

On Friday, bears were very active. However, they failed to gain control over the market. Today, sellers should protect the resistance level of 1.1063. A false break of the level may give a sell signal with the target at the support level of 1.1007. It is the lower limit of the upward channel.Since today the macroeconomic calendar is absolutely empty, a break of this area may cause an execution of some stop orders placed by speculative buyers after the Fed's meeting. An upward test of 1.1007 will give an additional signal to open sell orders with the target at 1.0953 and 1.0903.A farther target is located at the new low of 1.0855. If the euro rises and bears fail to protect 1.1063, bulls may open a lot of long positions, hoping for the continuation of the uptrend. Thus, traders shouldremain cautious. It will be better to open short positions after a false break of 1.1116. It is possible to sell the euro from 1.1168 or from 1.1227, expecting a change of 15-20 pips.

Commitment of Traders Report

The COT report unveiled a rise in the number of both long and short positions. There is no wonder that the number of sellers advanced amid the special military operation in Ukraine. However, regardless of the euro's depreciation, buyers remain active amid the attractive price. Last week, the ECB held a meeting, thus bringing their policy to light. This fact added confidence to buyers of risk assets. Christine Lagarde unveiled the regulator's intention to switch to a more aggressive approach to QE tapering and the key interest rate hike. This announcement provided traders with a mid-term bullish signal. However, traders should also take into account the Fed meeting. It is difficult to predict the regulator's actions given the highest inflation rate in the last 40 years. In addition, the negotiations between Russia and Ukraine have not borne fruits yet.

That is why I recommend continuing to buy the greenback since the main trend of the euro/dollar pair is still bearish. According to the COT report, the number of long non-commercial positions increased to 242,683 from 228,385, whereas the number of short non-commercial positions surged to 183,839 from 163,446. The weekly close price declined to 1.0866 from 1.1214.

Signals of indicators:

Moving Averages

Trading is conducted just below the 30- and 50-day moving averages, which indicates that bears are still controlling the market. .

Note: The period and prices of moving averages are considered by the author on the one-hour chart that differs from the general definition of the classic daily moving averages on the daily chart.

Bollinger Bands

If the price rises, the upper limit of the indicator located at 1.1036 will act as a resistance level. In case of a decline, the lower limit of 1.1010 will act as a support level.

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 long position opened by non-commercial traders.
• Short non-commercial positions is a total short position opened by non-commercial traders.
• The total non-commercial net position is a difference between the short and long positions opened by non-commercial traders