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Hourly chart of the EUR/USD pair
The EUR/USD pair tried to continue its downward movement for most of the day on Thursday, August 20. However, the pair's sellers failed to do any of this. The MACD indicator turned up, as we warned this morning, and began to discharge. If you look closely at the illustration, you will see that the indicator began to rise while the pair was trying to continue moving down. This is called "discharge", but today it has provided an excellent service to novice traders, since a new signal to sell did not form, and the price eventually began an upward correction. This is good. If the trend has changed to a downward trend, then in any case, you need to wait for a pullback to the top and only then should you open new sales of the euro/dollar pair. Of course, the downward movement can continue without a pullback, but in this case, it will be more difficult and dangerous to work with such a movement.
There was only one macroeconomic release today. The report on applications for unemployment benefits. We have said in previous articles that this is not the most important report in the current environment, so there is unlikely to be a reaction to it. In practice, it turned out that the report was worse than forecasts (1,106,000 against 925,000), so in any case, it could not support the US dollar. Therefore, the upward movement of the euro/dollar pair (which means the fall of the dollar and the growth of the euro currency) could be caused by a technical correction, a weak report on applications for benefits, or both. As for the overall fundamental background, it has not changed much in recent days. Democrats and Republicans continue to negotiate a new package of economic assistance to the unemployed and small businesses, relations between China and the United States continue to deteriorate, and the scale of the pandemic in America remains high. Thus, if the current positions of the pair were led by a US fundamental background (absolutely negative), then it has not changed recently.
Six business activity indices in the manufacturing and services sectors will be published at once on August 21, Friday, in America and the European Union. These indices reflect the activity of purchasing managers and business conditions in the areas of economics. As a reminder, any reading above 50 is considered positive. All six indices have higher than 50.0 past values as well as higher forecasts. Moreover, after the severe fall of both economies, a recovery has now begun, which means that all business activity indices are simply obliged to go up. Accordingly, market participants can be disappointed only if one or more indices are unexpectedly below 50.0. In this case, pressure on the currency of this country may begin.
The following scenarios are possible on August 21:
1) Longs on the pair are currently not relevant, since the price has overcome the upward trend line. Thus, now buyers need to wait for a new upward trend to form. You need to wait until new trend patterns have been constructed or cancel the corresponding descending patterns. Since the latter are not available at this time, it is not necessary to expect buy signals in the near future.
2) Sales of the currency pair are more relevant at this time, since the breakdown of the trend line was not false. Thus, we recommend waiting for the MACD indicator to turn down and then open new sell orders with the goals of 1.1794 and 1.1751. The closer to the zero mark the MACD indicator turns down, the less the indicator will be late to react.
What's on the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is preferable to trade now.
Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.
MACD indicator (10,20,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important announcements and economic reports (you can always find them in the news calendar) can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginners in the Forex market should remember that not every single trade should be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
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