EUR/USD: plan for the European session on February 23. COT reports. Bulls seized the moment, euro continues to rise. Aim
To open long positions on EUR/USD, you need:
The bulls coped with their task in continuing the upward trend despite the fact that they also failed to enter the market in the afternoon, not allowing the bears to create a downward correction pair earlier this week. The only signal that formed during the US session was a sell from the 1.2167 level. Let’s take a look at the 5-minute chart. It shows how after updating resistance at 1.2167, a rollback by 15 points to the downside had occurred. In my afternoon forecast, I advised you to open short positions in that level. The chart also shows that after surpassing resistance at 1.2143, it was not possible to wait for this level to be tested from top to bottom, and therefore I was forced to miss the signal.
Before talking about the prospects for the EUR/USD movement, let’s see what happened in the futures market and how the Commitment of Traders (COT) positions changed. The COT report for February 16 revealed that there were no significant changes in the positions of large players, which once again indicates the temporary equilibrium of the pair before a new wave of growth this spring. The major decline from the previous week was won back, and this confirms the theory that the demand for the US dollar continues to decrease among investors. Therefore, a more correct approach to the market is to buy the euro for the medium term. A good factor for the euro would be the moment when European countries begin to actively roll back quarantine and isolation measures, and the services sector will start working in full force again, which will lead to an improved economic outlook and also strengthen the EUR/USD pair. The COT report indicated that long non-commercial positions rose from 220,943 to 222,895, while short non-commercial positions rose from 80,721 to 82,899. As a result, the total non-commercial net position slightly narrowed after rising to 140,006 from 140,222. The weekly closing price was 1.2132 against 1.2052 a week earlier, which indicates the presence of buyers in the market.
It is necessary to pay attention to today’s reports on eurozone inflation, where a growth in this indicator will result in strengthening the euro. However, this will happen provided that the consumer price index turns out to be much higher than economists’ forecast. Federal Reserve Chairman Jerome Powell will speak in the afternoon and report on the US consumer confidence indicator, but more on that later. In case EUR/USD grows further in the first half of the day, buyers will focus on surpassing and being able to settle above resistance at 1.2181. Testing this area from top to bottom creates an excellent signal to open long positions in euros in hopes to rise towards the high of 1.2220, where I recommend taking profits. Bulls will further aim for resistance at 1.2260. The euro might be under pressure if buyers are not active during the European session. In this case, the bulls will need to focus on protecting support at 1.2136, slightly above which are the moving averages playing on the side of the euro buyers. Forming a false breakout in that area creates a good entry point into long positions in hopes to continue the upward trend. If bulls are not active at this level, then I recommend holding back from long positions until the test of the low of 1.2093, from where you can buy the euro immediately on a rebound, counting on an upward correction by 20-25 points within the day.
To open short positions on EUR/USD, you need:
I recommend opening short positions against the upward trend in the morning only in case of a false breakout in the resistance area of 1.2181, which will generate a signal to sell the euro. Returning to the area under the 1.2136 level and testing it from the bottom up creates a convenient point for entering the market. A disappointing inflation report could increase the pressure on the euro. Its divergence from forecasts will significantly affect the market and will result in bringing back large sellers to the market. Testing the 1.2136 level from the bottom up creates an excellent entry point to sell, and in this scenario, the next important task is to return EUR/USD to the support area of 1.2093, as the pair’s succeeding direction depends on whether the pair manages to go beyond it. Surpassing this level will lead to a reversal of the upward trend. If we continue to observe an upward trend in the first half of the day, and the bears are not active in the resistance area of 1.2181, then it is best to hold back from opening short positions until the test of a new high at 1.2220, from where you can sell EUR/USD immediately on a rebound while aiming to pull it down by 20-25 points within a day. The next major resistance is seen around 1.2260.
Trading is carried out above 30 and 50 moving averages, which indicates the bulls’ attempt to continue the pair’s upward correction.
Note: The period and prices of moving averages are considered by the author on the H1 chart and differs from the general definition of the classic daily moving averages on the D1 daily chart.
A breakout of the upper border of the indicator in the 1.2190 area will lead to a new wave of growth of the euro. In case the pair falls, support will be provided by the lower border of the indicator in the 1.2115 area.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked in yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked in green on the chart.
- MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and 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 short and long positions of non-commercial traders.
The material has been provided by InstaForex Company – www.instaforex.com