FX.co ★ Outlook for EUR/USD for European session on April 4. COT reports. US labor market data fail to support US

On Friday, market volatility was rather low. However, the general sentiment remained bearish. Let us take a look at the five-minute chart to analyze the market situation. In the first part of the day, a surge in the eurozone inflation put significant pressure on the euro/dollar pair. However, the price failed to reach the expected levels. That is why traders did not receive any signal to enter the market. During the US trade, we had expected a significant rise in the number of positions and volatility. However, mixed reports did not allow the pair to leave the sideways channel. That is why there were no signals to start trading.

Conditions for opening long positions on EUR/USD:

The increase in the US non-farm employment was not as considerable as expected. However, the unemployment rate dropped to 3.6% that corresponds to a high employment level. Such data only slightly supported the greenback. Notably, such data reflects a stable economy, which may avoid recession despite high inflation that has not hit yet the peak level. Today, we do not expect any reports that may dramatically change the market sentiment. That is why sellers of the euro are likely to control the market. In the eurozone, the Sentix investor confidence data is likely to be negative especially amid the current economic events. That is why today, traders may open long positions only if the pair declines to 1.1031. The decline could occur amid a weak report. A false break of 1.1031 may provide traders with the first buy signal. Traders should be very active at 1.1065 to see a bullish trend and the pair's return to the highs recorded in March. Even strong data from the eurozone will hardly allow the pair to break the mentioned level. Only a downward test of 1.1065 will give an additional signal to buy the euro, thus pushing the price to 1.1093, where it is recommended to lock in profits. A break of the level will allow the pair to climb to such highs as 1.1131 and 1.1174. If the pair falls and bulls fail to protect 1.1031, it is better not to open long positions. It will be possible to go long from 1.0977 or lower from 1.0948, expecting a rise of 30-35 pips within one day.

Conditions for opening short positions on EUR/USD:

Bears failed to reach all the goals, but the market sentiment remained bearish. It means that early this week, the euro/dollar pair may continue losing value. Today, sellers should protect the resistance level of 1.1065. Only a false break of this level will put pressure on the euro and give a sell signal with the target at the strong support level of 1.1031. However, the price will hardly break this level due to the absence of important macroeconomic data. The pair will decline to the level only amid weak data on the eurozone investor confidence indicator. Notably, the figures could be significantly worse than anticipated. A downward test of 1.1031 may give an additional sell signal, thus allowing the pair to slide to the lows of 1.1005 and 1.0977, where it is recommended to lock in profits.If the euro rises and bears fail to protect 1.1065, bulls are likely to return to the market to continue forming the new trend. However, the scenario will become possible only amid positive news about the Russia-Ukraine talks. Thus, it is better to avoid sell orders. It will be possible to go short only amid a false break of 1.1093. Traders may also sell the pair from 1.1131 or higher from 1.1174, expecting a drop of 20-25 pips.

COT report.

According to the COT report from March 22, the number of short positions declined, whereas the number of long positions soared. The pair's hovering near yearly lows and a strong support level had a positive effect on the euro. However, judging by the figures, a drop in the number of short positions was insignificant. Pressure on the euro/dollar pair returned after a small pause caused by Jerome Powell's announcement about a more hawkish stance of the Fed. On Monday, the Fed Chair said that the regulator was planning to raise the benchmark rate by 50 basis points at the following meeting. The same comments were provided by other representatives of the Federal Reserve. As a result, some market participants have revised their forecasts. The regulator has to resort to such sharp changes due to the risk of further inflation growth. Not so long ago, Christine Lagarde also unveiled the ECB's plan for a more aggressive QE tapering and the key interest rate hike. The news has a positive influence on the euro in the mid term. Notably, the single currency is significantly oversold against the US dollar. Good results of the Russia-Ukraine negotiations and lower geopolitical tension may encourage buyers of the euro. The COT report disclosed that the number of long non-commercial positions advanced to 207,051 from 202,040, whereas the number of short non-commercial orders declined to 183,208 from 183,246. A weekly close price inched up to 1.1016 from 1.0942.

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 1.1055 will act as a resistance level. In case of a decline, the lower limit of 1.1030 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 number of long positions opened by non-commercial traders.
• Short non-commercial positions is a total number of short positions opened by non-commercial traders.
• The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.