In my morning forecast, I focused on the 1.0398 level and planned to make trading decisions based on it. Let's look at the 5-minute chart and analyze what happened. A breakout and retest of 1.0398 provided a good entry point for buying EUR/USD in continuation of the uptrend, leading to a gain of over 30 points. The technical picture has been revised for the second half of the day.

Long Position Strategy for EUR/USD:

While the Eurozone services activity data did not fully meet economists' expectations, the composite index remaining above 50 points sustained optimism among euro buyers, resulting in a new wave of EUR/USD strengthening in the first half of the day.

Ahead, several key U.S. economic reports could reshape the market, including ADP employment change for January and ISM Services PMI. Weak data will support the EUR/USD uptrend, while strong data will renew demand for the U.S. dollar.

If EUR/USD declines, a false breakout around 1.0395 will provide a good entry point for long positions, targeting resistance at 1.0432, which has yet to be broken today. A break and retest of this range will confirm a buy entry, with targets at 1.0464 and the 1.0495 high, where I plan to take profits. If EUR/USD drops further and there is no activity at 1.0395, sellers could extend the decline to 1.0360. A false breakout at this level would be another buy signal. I will only buy on an immediate rebound from 1.0322, aiming for an intraday correction of 30-35 points.

Short Position Strategy for EUR/USD:

Sellers remain on the sidelines, seemingly puzzled by the euro's continuous gains for a third straight day, despite the lack of major catalysts. If U.S. data disappoints, focus will be on protecting the key resistance at 1.0432. A false breakout at this level will confirm strong sellers, allowing entry into short positions with a target at 1.0395 (formed earlier in the day). A break and retest of 1.0395 from below will open the way to a new low at 1.0360, aligning with moving averages that currently favor bulls. The final target for sellers will be 1.0322, where I will take profits.

If EUR/USD rises in the second half of the day and bears fail to act at 1.0432, the market will fully shift to the bulls' control. In this case, I will delay short positions until a test of 1.0464, where I will sell only after an unsuccessful consolidation. I will open shorts on an immediate bounce from 1.0495, aiming for a 30-35 point downward correction.

COT (Commitment of Traders) Report:

The COT report from January 28 showed a sharp reduction in both long and short positions. The number of long non-commercial positions decreased by 14,005 to 153,660. The number of short non-commercial positions decreased by 9,887 to 220,264.

This suggests that sellers still dominate the market, maintaining a bearish outlook for EUR/USD. However, this report does not reflect market changes following Trump's tariff announcements on China, Mexico, and Canada.

Indicator Signals

Moving Averages

Trading is above the 30- and 50-period moving averages, supporting further euro growth.

Note: The author's moving average calculations are based on hourly (H1) charts, which differ from the classic daily (D1) definitions.

Bollinger Bands

In case of a decline, the lower band around 1.0360 will act as support.

Key Indicator Descriptions:

• Moving Average (MA) – Identifies trend direction by smoothing market noise.
  • 50-period MA (Yellow)
  • 30-period MA (Green)
• MACD (Moving Average Convergence/Divergence) – Measures momentum.
  • Fast EMA: 12-period
  • Slow EMA: 26-period
  • Signal SMA: 9-period
• Bollinger Bands – Volatility indicator, 20-period setting.
• Non-commercial traders – Speculative investors, including individual traders, hedge funds, and large institutions, using the futures market for speculative purposes.
• Long non-commercial positions – The total open long positions held by speculative traders.
• Short non-commercial positions – The total open short positions held by speculative traders.
• Net non-commercial position – The difference between long and short speculative positions.