FX.co ★ EUR/USD: trading plan for US session on March 22 (morning trades analysis). Euro rebounds after hitting new weekly low

Long positions on EUR/USD:

In my forecast this morning, I drew your attention to the level of 1.1007 and recommended entering the market from it. Let's have a look at the 5-minute chart and analyze what happened. In the morning, the euro was under pressure, as traders in Europe took into account yesterday's statement of Federal Reserve Chairman Jerome Powell, who announced a more aggressive interest rate hike in the near future. However, the pair did not reach the level of 1.0953 I mentioned earlier, therefore there were no entry signals from it. After the recovery of the euro before the afternoon, bears managed to hold the price below resistance at 1.1007, creating a false breakout there, which led to the euro sell signal. The downside movement was about 20 pips, after which the pressure on the pair eased. In the second half of the day, the technical picture was partially changed.

Lack of fundamental statistics and drop of optimism among market participants after yesterday's statements of the Fed, as well as lack of clarity on further negotiations between Russia and Ukraine, did not allow euro buyers to return to the market properly in the first half of the day. Absolutely no fundamental statistics are to be published during the US session either, which will keep the market volatility at a rather low level. It is expected that bulls may try again to break through 1.1007, now it is 1.1011, so we can expect the upward movement of the euro. If the pair falls, only a false breakout at 1.0965, which was made after the European session, will be the first entry point into the longs. But in order to see a large upside movement in EUR/USD, bulls need to be active and break through resistance at 1.1011, which they failed to do in the first half of the day. Notably, the moving averages, which are on the side of the euro sellers, are located at that level. Considering that there are no positive changes in the geopolitical situation in the world, demand for risky assets will be obviously limited. Only the breakthrough of 1.1011 and the test top/bottom may give a buy signal and open the way to the pair's recovery to the area of 1.1049. This level serves as a major resistance, which was formed yesterday. The next target will be located at the high of 1.1091, where traders may lock in profits. A breakthrough of this level is likely to cancel the bearish trend and hit the sellers' stop-loss orders, opening a direct way to the highs of 1.1136 and 1.1181. However, this scenario can be expected in case of another good news on the improvement of the geopolitical situation in Ukraine. If the pair declines and there is a lack of activity from bulls at 1.0965, it would be better to postpone opening long positions. A false breakout of the low at 1.0928 would be the best buy scenario, however, it would be better to hold long positions from 1.0891 to 1.0928, allowing an upward correction of 30-35 pips.

Short positions on EUR/USD:

Bears were actively acting in the market in the first half of the day, but did not change the balance of forces. Despite this, sellers need to continue thinking about how to hold the price below the resistance at 1.1011. Only in case of another false breakout at this level after the failed breakthrough of 1.1011, we might open the short positions with the target at support of 1.0965. Bulls are likely to try to regain control over this level again, as it is their last hope to continue growing in the short term. The lower boundary of the uptrend channel from March 4 passes there as well. Considering that there are no important fundamental statistics today, a breakthrough of that level may trigger stop-loss orders of the speculative buyers, who opened long positions last week after the Fed meeting. A reversal test bottom/top of 1.0965 will give an additional signal to open short positions, with the prospect of falling to the levels of 1.0928 and 1.0891. The next target is at a new low of 1.0855. In case the euro rises and there is a lack of bears' activity at 1.1011, bulls will continue to go long, hoping for the continuation of the uptrend, which requires daily highs retest. In this case, it is better to postpone selling the pair. Short positions may be opened if a false breakout occurs near 1.1049. Selling the EUR/USD pair immediately on a rebound is possible from 1.1091, or higher from 1.1136, allowing a downward correction of 15-20 pips.

The COT (Commitment of Traders) report for March 15 showed a decrease in both long and short positions. However, if you look at the figures you can see that the reduction of short positions was minimal unlike the long ones, which became much less. It was not surprising, against the background of the Russian military special operation on the territory of Ukraine. The Federal Reserve meeting was the central event of last week. As a result, the committee raised interest rates by 0.25%, which did not lead to serious changes in the market, as many had expected such decisions. Another thing is that Fed Chairman Jerome Powell took a wait-and-see approach during his speech, failing to signal a more aggressive policy, which triggered a build-up of long positions in risky assets. However, at the beginning of this week, the Fed Chairman changed his approach saying in the interview that there is a high probability to increase the interest rate by 0,5% points at the next FOMC meeting. This is a strong bullish signal for the US dollar which is likely to continue its growth against the euro. However, the European Central Bank also held a meeting, where President Christine Lagarde announced plans for a more aggressive tapering of economic support measures and interest rate hikes. It was good for the medium-term outlook of the European currency, which is already heavily oversold against the US dollar. The COT report showed that long non-commercials declined to 202,040 from 242,683, while short non-commercials fell to 183,246 from 183,839. At the end of the week, total non-commercial net positioning was down to 18,794 against 58,844. The weekly closing price rose slightly to 1.0942 from 1.0866.

Indicators' description:

Moving averages

The pair is trading below 30- and 50-period moving averages. It indicates the bear market.

Note. 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

In the case of growth, the upper boundary of the indicator near 1.1035 will act as resistance. A breakthrough of the lower boundary at 1.0965 is likely to lead to a larger sell-off of the euro.

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 (Moving Average Convergence/Divergence) indicator Fast EMA period 12. Slow EMA period 26. SMA period 9
• Bollinger Bands. 20-day period.
• 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.