EUR/USD: plan for the European session on February 11. COT reports. Bullish momentum slows down. Time to recall the downward

To open long positions on EUR/USD, you need:

Yesterday, there was a signal to enter the market, which I spoke about in detail in my afternoon forecast. Let's take a look at the 5-minute chart and see what happened. We could see that buyers tried to break through the resistance of 1.2129 after the German inflation report was released, but after testing this level, the pair did not receive support from the reverse side. As a result, the price returned to the area below the 1.2129 level. Testing this area from the bottom up created a signal to sell the euro. The whole emphasis was placed on the US inflation report, therefore, before this report was published, the pair fell by around 15 points. The US data came as no surprise, which caused EUR/USD to return to the 1.2129 area, which is where trading stuck around until the end of the day.

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Important fundamental data will not be released in the first half of the day, so it is possible that the pair will continue to trade in a horizontal channel. The reports on the German wholesale price index and the economic forecast from the European Commission will hardly surprise the market. A downward correction in the euro has been brewing for a long time. At a minimum, the fact that yesterday, the bulls did not support the euro above 1.2139 indicates a pause in the upward trend. Today, trading may continue further in a horizontal channel, so I advise you to act from the nearest levels in opposite directions. If EUR/USD rises in the first half of the day, buyers will be focused on forming a breakout and being able to settle above resistance at 1.2139. Testing this area from top to bottom creates an excellent signal to open long positions in the euro in order to rise towards a high of 1.2175, where I recommend taking profits. Resistance at 1.2220 will be a distant target. If we receive disappointing fundamental reports on the eurozone economy during the European session, as well as a downward correction in EUR/USD, then buyers will need to focus on protecting support at 1.2103, just above which are moving averages, playing on the side of the bulls. Forming a false breakout there creates a good entry point into long positions while expecting to sustain the upward trend. If buyers are not active at this level, I recommend postponing long positions until the test of the 1.2069 low, 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 this morning, but only in case a false breakout forms in the resistance area of 1.2139, which will generate a signal to sell the euro. Weak data on the euro area and Lagarde's speech on the topic of a slower recovery of the European economy will likely weigh on EUR/USD in the first half of the day. This will allow the bears to return EUR/USD to the support area of 1.2103, as the pair's succeeding direction depends on whether the price will surpass this level. A breakout and being able to test this level from the bottom up will create a new entry point for short positions, which will push EUR/USD to a low in the area of 1.2069, where I recommend taking profits. The 1.2035 level will be a succeeding target. If we continue to observe an upward trend from the euro in the first half of the day, and the bears are not active in the resistance area of 1.2139, then it is best to postpone short positions until a new high at 1.2175 has been tested, from where you can sell EUR/USD immediately on a rebound in order to pull it down by 20-25 points within the day. The next major resistance is seen around 1.2220.

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The Commitment of Traders (COT) report for February 2 revealed a sharp rise in short positions and a reduction in long positions, which reflects the pair's downward correction in late January and early February this year. Weak fundamentals for the eurozone economy and lower economic estimates from the European Central Bank limit the euro's growth potential, so does the fact that vaccinations in the eurozone will proceed at a slower pace than expected. All of this will lead to a double recession in the European economy in early 2021, but it is unlikely to seriously affect the medium-term prospects for the EUR/USD recovery. Therefore, with each significant downward correction, the demand for the euro will only increase, and the lower the rate, the more attractive it will be for investors. The prospect of canceling quarantine will clearly keep the market positive in the future. The COT report indicated that long non-commercial positions fell from 238,099 to 216,887, while short non-commercial positions rose from 72,755 to 79,884. Due to the sharp decline in long positions, the total non-commercial net position fell to 137,003 against 165,344 a week earlier. The weekly closing price was 1.2067 against 1.2142.

Indicator signals:

Moving averages

Trading is carried out in the area of 30 and 50 moving averages, which indicates that the market will move sideways or that a downward correction is being formed.

Note: The period and prices of moving averages are considered by the author on the H1 hourly chart and differs from the general definition of the classic daily moving averages on the daily D1 chart.

Bollinger Bands

A breakout of the upper level of the indicator in the 1.2139 area will lead to a new wave of growth for the euro. A breakout of the lower border of the indicator in the 1.2105 area will raise the pressure on the pair.

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

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