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21.03.2023 08:13 AM
EUR/USD: trading plan for European session on March 21. COT report. EUR to reach new monthly high

Yesterday, traders received several signals to enter the market. Let us take a look at the 5-minute chart to clear up the market situation. Earlier, I asked you to pay attention to the level of 1.0660 to decide when to enter the market. A decline and a false breakout of 1.0660 led to a buy signal but the pair failed to rise. As a result, traders suffered losses. After a decline to the support level of 1.0632, traders received a buy signal, which led to a jump of 90 pips.

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Conditions for opening long positions on EUR/USD:

First of all, let us focus on the futures market situation and the COT report. According to the COT report from March 7, the number of long positions dropped, whereas the number of short positions increased. Notably, the data is of zero importance at the moment as it was relevant two weeks ago. The CFTC is still recovering after a cyberattack. It is better to wait for new reports. This week, the Federal Reserve will hold a meeting, during which it may pause the monetary policy tightening. The fact is that the problems in the banking sector and the launch of a new credit swap line to support other banks with liquidity may seriously affect the economy. If Jerome Powell decides to raise the key rate higher, the US dollar is unlikely to receive support. Traders are pricing in the Fed's switch to a less hawkish stance and monetary policy loosening by the end of the year. The COT report unveiled that the number of long non-commercial positions dropped by 6,886 to 233,880, while the number of short non-commercial positions increased by 6,865 to 85,432. At the end of the week, the total non-commercial net position decreased to 148,448 against 165,038. The weekly closing price dropped to 1.0555 against 1.0698.

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Today, the marker is calm ahead of the FOMC meeting. That is why bulls may benefit from the situation. Only data on the German and eurozone's business sentiment and current assessment may affect the euro. In this light, traders should be cautious when opening long positions. It will be wise to go long after a decline and a false breakout near a new support level of 1.0691 formed yesterday. There are bullish MAs. In this case, the target will be located at the nearest resistance level of 1.0724. Bulls failed to break this level during the Asian trade. A breakout and a downward test of this area amid hawkish comments from Christine Lagarde may allow the pair to climb to this month's high of 1.0758. This, in turn, may boost the price to 1.0801. The farthest target is located at the high of 1.0834. The price will be able to hit this level amid weak data from the US. It is better to lock in profits at this level. If the euro/dollar pair declines and buyers fail to protect 1.0691, the market situation will remain calm until the publication of the key rate decision. In the event of this, only a false breakout near the next support level of 1.0652 will give a buy signal. Traders may also go long just after a bounce off the low of 1.0614 or even lower – at 1.0576, expecting a rise of 30-35 pips.

Conditions for opening short positions on EUR/USD:

Bears managed to keep the level of 1.0724, but the pair has not dropped yet. Bulls may exceed this level in the first part of the day. First of all, bears should protect the resistance level of 1.0724. A false breakout of this level and weak data from the eurozone will give a sell signal with the target at 1.0691. A breakout and settlement as well as an upward test of this level will give an additional sell signal. In this case, the pair may slide to 1.0652. The pair may drop below this level only in the second part of the day. The target is located at 1.0614, where it is recommended to lock in profits. If the euro/dollar pair increases during the European session and bears fail to protect 1.0724, bulls will keep control of the market. In this case, it is better to avoid selling until the price touches 1.0758. A false breakout of this level will give a new sell signal. It is also possible to sell after a rebound from the high of 1.0801 or even higher – at 1.0834, expecting a decline of 30-35 pips.

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Signals of indicators:

Moving Averages

Trading is performed above the 30- and 50-day moving averages, which points to a further rise in the pair.

Note: The author considers the period and prices of moving averages on the one-hour chart which differs from the general definition of the classic daily moving averages on the daily chart.

Bollinger Bands

In case of a decline, the lower limit of the indicator located at 1.0690 will act as support. If the pair increases, resistance will be seen at 1.0730, the upper limit of the range.

Description of indicators

  • Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 50. It is marked in yellow on the chart.
  • Moving average (a moving average determines the current trend by smoothing volatility and noise). The period is 30. It is marked in green on the graph.
  • MACD indicator (Moving Average Convergence/Divergence - convergence/divergence of moving averages). A fast EMA period is 12. A slow EMA period is 26. The SMA period is 9.
  • Bollinger Bands. The period is 20.
  • Non-profit speculative traders are individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
  • Long non-commercial positions are the total number of long positions opened by non-commercial traders.
  • Short non-commercial positions are the total number of short positions opened by non-commercial traders.
  • The total non-commercial net position is a difference in the number of short and long positions opened by non-commercial traders.
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