In my morning forecast, I focused on the level of 1.0660 and suggested deciding to enter the market based on it. Let's take a look at the 5-minute chart and see what happened. Although there was a signal to buy the euro following the collapse and creation of a false breakout in the area of 1.0680, there was no upward movement. Losses were consequently recorded for the deal. Following a more significant decline of the pair, a buy signal also developed close to the next support level of 1.0632, which caused the euro to rise by 40 points. This made it possible to recover losses and make a small profit. The technical situation barely changed in the afternoon.
If you want to trade long positions on EUR/USD, you will need:
German producer prices increased year over year and decreased less than anticipated. The entire attention is now on Christine Lagarde's speech, which can further strengthen the euro with her words. The hawkish remarks of the ECB president will enable the euro to hit a new weekly high given the lack of basic statistics during the US session. In the event of a drop and a negative response to Christine Lagarde's speech, I encourage you to wait to take action until after the test and formation of a false breakout in the morning support area of 1.0632, which will pave the way for a direct route to a new resistance of 1.0681. This level's breakout and top-down test provide an extra entry point for developing long positions with a move to 1.0723, where it will be very challenging for bulls to advance. The bears' stop orders will be hit by the collapse of 1.0723, which will give another signal and maybe lead to a move to the monthly maximum of 1.0758, where I will fix profits. Pressure on the euro may increase if EUR/USD drops in the afternoon and there are no buyers around 1.0632, which is also likely given that this level has already been tested during the European session. The next support level of 1.0595 will be reached if this level is broken. Only the emergence of a false collapse will provide a signal to purchase the euro. For a rebound from the low of 1.0554, or even lower - around 1.0520 - I will begin long positions right away with the target of an upward corrective of 30-35 points during the day.
If you want to trade short positions on EUR/USD, you'll need:
Sellers made an effort to put pressure back on the euro, but newly disclosed figures concerning the eurozone raised doubts about the need for the European Central Bank to continue maintaining a strict monetary policy. The resistance of 1.0681 must now be aggressively defended by the bears. The emergence of a false breakout will be the best scenario for establishing short positions. This will cause the euro to fall toward the nearest level of support at 1.0632, just above where the moving averages are supporting the bulls. The pair will decline even lower on a breakdown and reversal test of this range, which will serve as a second signal to start short positions with an exit at 1.0595. After Christine Lagarde's speech, a fix below this range will result in a larger drop to the 1.0554 area, where I will collect profits. I encourage you to delay opening short bets until the price of 1.0723 if the EUR/USD moves higher during the American session and there are no bears at 1.0681. Only after an unsuccessful consolidation can you sell there. In anticipation of a rebound from the high of 1.0758, I will open short positions right away with a 30- to 35-point corrective in mind.
In the COT report (Commitment of Traders) for February 21, fewer long and short positions were reported. It should be clear that these data are of no interest at the moment because, amid the CFTC cyberattack, statistics are only now starting to catch up, making the data from one month ago less useful. I'll hold off till new reports are released and rely on more recent data. Inflation in the US is one of the significant events this week, and it could finally increase traders' confidence that the Fed and Jerome Powell won't resume their hard-line stance, as was stated last week. The prospect of the US banking industry collapsing, which emerged during the BSV bankruptcy, would undoubtedly alter Fed policymakers' assessments of how much more they need to raise the rate to "finish off" the economy. According to the COT data, the number of long non-commercial posts fell by 160 to 236,414 while the number of short non-commercial employment fell by 1,322 to 71,346. The total non-commercial net position rose to 165,038 from 150,509 after the week. The weekly closing price fell from 1.0742 to 1.0698.
Signals from indicators
Moving Averages
The fact that trading is taking place above the 30 and 50-day moving averages suggests that the market is trying to change course.
Notably, the author considers the time and prices of moving averages on the hourly chart H1 and departs from the standard definition of the traditional daily moving averages on the daily chart D1.
Bands by Bollinger
The indicator's upper limit, which is located at 1.0695, will serve as resistance in the event of growth.
Description of indicators
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow.
- Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green.
- MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-profit speculative traders, such as individual traders, hedge funds, and large institutions use the futures market for speculative purposes and to meet certain requirements.
- Long non-commercial positions represent the total long open position of non-commercial traders.
- Short non-commercial positions represent the total short open position of non-commercial traders.
- Total non-commercial net position is the difference between the short and long positions of non-commercial traders.
