To open long positions on EUR/USD, you need:
The pre-Christmas trades were rather calm and within the horizontal channel. Given the low volatility of the market, no entry signals were generated. The news that a trade agreement between the UK and the EU was reached at the last moment did not greatly agitate the markets that were getting ready for Christmas.
The technical picture has not changed. Buyers will continue to focus on protecting support at 1.2174. Forming a false breakout there in the first half of the day, similar to the previous buy deals, which I analyzed in my daily reviews, will lead to forming a signal to open long positions in the euro. However, given the lack of important fundamental statistics and the low trading volume in the final week before the New Year, most likely buyers will not be active. In case traders are not active when EUR/USD returns to support at 1.2174, I recommend postponing long positions until last week's low (1.2130) has been updated. It is also possible to buy the euro immediately on a rebound from a new local low at 1.2083, counting on a correction of 20-25 points within the day. It will only be possible to say that buyers of the euro have managed to regain control of the market when the pair has surpassed and settled above the resistance of 1.2218. However, testing this level from top to bottom creates an additional signal to buy the euro with the main goal of returning resistance at 1.2254, where I recommend taking profits.
To open short positions on EUR/USD, you need:
Sellers of the euro aim to regain control over the 1.2174 level. Getting the pair to settle below this range and testing it from the other side will increase the pressure on the pair, which creates a good entry point for short positions. In this case, the main target will be this week's low at 1.2130. The pair is unlikely to surpass this area early this week. However, if it does happen, falling towards 1.2083 is not excluded, and the key target at the end of the year will be the 1.2042 area, where I recommend taking profits. An equally important task is to protect resistance at 1.2218, near which trade is now being conducted. Forming a false breakout there creates a good entry point for short positions in hopes to return to the support area of 1.2174. Data on the German consumer price index will be released today, which is unlikely to seriously affect the market, but given the lack of other fundamental data, we can pay attention to it. If bears are not active at the 1.2218 level, I recommend postponing short positions until the high of 1.2254 has been tested, or sell EUR/USD immediately on a rebound from the resistance of 1.2304, counting on a correction of 20-25 points within the day.
Let me remind you that the Commitment of Traders (COT) report for December 15 recorded an increase in short positions and a reduction in long ones. Although buyers of risky assets believe that the bull market will continue, especially amid the beginning of vaccinations in the eurozone, which started this weekend, however, the rush to buy at current highs has obviously diminished. Long non-commercial positions fell from 222,521 to 218,710, while short non-commercial positions increased from 66,092 to 76,877. The total non-commercial net position fell from 156,429 to 141,833 a week earlier. The growth of the delta, which was observed for three consecutive weeks, has stopped, so it will hardly be possible to count on the euro's rapid growth at the end of this year. It will be possible to talk about a major recovery only after the new year, when the first reports on the EU's economic state in December 2020 will start to be released.
Indicator signals:
Moving averages
Trading is carried out in the area of 30 and 50 moving averages, which indicates market uncertainty.
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 lower border of the indicator in the 1.2174 area will increase pressure on the euro. The breakout of the upper border in the 1.2218 area will lead to a new wave of euro growth.
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.
