EUR/USD: plan for the European session on March 12. COT reports. Euro bulls' optimism ended in the resistance area of 1.1989

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

Yesterday was a rather interesting trading day. There were many deals to buy and sell euros. Let's take a look at the 5-minute chart and talk about what happened. An unsuccessful test of resistance at 1.1943 in the first half of the day led to forming a false breakout and created a signal to open short positions in the euro. However, there was no major downward movement, and after a while the bulls still broke through 1.1943. I did not enter a long position at this level, since I was waiting for a reverse correction and a test of the 1.1943 area from top to bottom (I marked the expected movement with blue lines). Alas, I did not wait for it. The long-awaited test of the 1.1943 level took place in the afternoon, which made it possible for us to enter the market. The movement from this level was about 30 points, afterwards everyone began to wait for European Central Bank President Christine Lagarde's speech: Lagarde's statements led to a breakdown and the 1.1943 level was tested from the bottom up, which created a signal to open short positions. But there was something with short positions yesterday and so we were unlucky on this level. Having gone about 15 points to the downside, another reversal of the market took place in favor of bulls. There are days when the market reacts to any statements of the ECB representatives in its own way. Therefore, it's okay that yesterday's sell deals didn't work out as needed. The main thing is to stick to a trading strategy.

analytics604ae3a83762c.jpg

Given that the ECB has made it clear that it will increase the PEPP bond buying program in the second quarter of this year, the pressure on the euro has slightly eased and reduced bond yields. The EUR/USD pair's succeeding growth will depend on the actions of the bulls. The main target for the first half of the day is to break through resistance at 1.1989. Testing this level from top to bottom creates a new entry point into long positions, counting on the renewal of highs at 1.2047 and 1.2109. However, reaching these levels will only happen if reports on consumer prices in Germany and the volume of industrial production in the eurozone turn out to be much better than economists' forecasts. If bulls are not active in the 1.1989 area: then I recommend waiting for EUR/USD to fall and open long positions after a false breakout forms in the 1.1933 support area. There are also moving averages that play on the side of the euro buyers. Larger support is seen slightly lower in the 1.1884 area, from where you can buy EUR/USD immediately on a rebound, counting on an upward correction of 25-30 points within the day.

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

Returning to the area below the 1.1933 level generates a signal for opening short positions. But, before selling the euro below 1.1933, I recommend waiting for this area to be tested from the bottom up, as well as the breakdown of the moving averages. The euro might be under pressure if we receive disappointing reports on the eurozone. In this case, you can count on renewing the 1.1884 low, where I recommend taking profits. Further support is seen around 1.1838, which coincides with this month's low. If the euro grows in the first half of the day, then I recommend not to rush to sell: forming a false breakout in the resistance area of 1.1989 will result in creating the first signal for opening short positions. If there is no activity at this level, then I recommend postponing shorts until the resistance test of 1.2047, from which you can open short positions in euros immediately on a rebound, counting on a downward correction down by 25-30 points within the day.

analytics604ae3b1f04cf.jpg

The Commitment of Traders (COT) report for March 2 revealed a sharp decline in long positions and a very large increase in short positions, which indicates a clear shift in the market towards sellers of risky assets. This is confirmed by the graph of the euro decline, which we have been observing for the third week. This time, it was not possible to quickly win back the next large decline in the pair. The sharp rise in bond yields in many developed countries continues, which plays in the favor of the dollar, as investors expect the United States to be the first to start raising interest rates, which makes the greenback more attractive. The recent approval by the US Senate of a new bailout package and a $1,400 payment to all Americans affected by the pandemic makes risky assets even less attractive. Therefore, it is better not to rush to buy euros, but to wait for lower prices. A good advantage for the euro will be the moment when the active curtailment of quarantine and isolation measures begins in European countries: Germany has already announced its plan in this direction, but it has not yet come to the point. It is also necessary to wait for the moment when the service 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 declined from 228,501 to 222,655, while short non-commercial positions rose from 90,136 to 96,667. As a result, the total non-commercial net position declined again for the third consecutive week, from 138,365 to 125,988. The weekly closing price was 1.2048 against 1.2164 a week earlier.

Indicator signals:

Moving averages

Trading is carried out above 30 and 50 moving averages, which indicates that the upward correction will continue for the pair.

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.

Bollinger Bands

A breakout of the upper border of the indicator in the 1.1995 area will lead to a new wave of growth for the euro. A breakout of the lower border of the indicator in the area of 1.1940 will increase 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

Pages