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EUR/USD hourly chart
On Tuesday, September 1, the EUR/USD pair has finally reversed to the downside and settled below the upward trend line. However, as we have mentioned earlier, the uptrend line had a very strong decline. Therefore, almost any correction would lead to consolidation of the quotes below this line. This is exactly what happened today. First, the MACD indicator turned downward, giving a signal to all buyers to close long positions. Then, the price passed the trend line, so it was possible to open short positions. Even though the pair is going through a correction, it can still move down by a certain number of pips. The price passed the ascending trend line just as the downward movement started, and not when it ended. In this case it would be too late to open sell positions. Thus, we think that beginners had the right moment to open sell positions today, since the signal was quite obvious. In the morning, we set the downward target at the level of 1.1891. We believe that the price can reach this target today or tomorrow. Thus, if you opened the trades at the cross point with the trend line, you can leave them open until the morning by placing Stop Loss.
There were a lot of macroeconomic events on Tuesday. However, as we warned yesterday evening and this morning, only the US ISM Manufacturing PMI influenced the pair's trajectory. The data exceeded the forecasts and amounted to 56 points. Apart from this index, it is worth mentioning the drop in the EU inflation rate in August. According to preliminary estimates, it is seen to decline to -0.2% year-on-year. This actually indicates deflation - a fall in prices - rather than inflation. It is believed that controlled inflation within 2-3% spurs the economic growth. Therefore, deflation is a very dangerous phenomenon for countries with developed economies. This is definitely bad news for the EU and the euro. That could be the reason of the weakening euro on Tuesday, as the estimated and the released readings differ sharply.
On Wednesday, September 2, no key economic statistics are expected. We can advise novice traders to focus their attention on the ADP report on the change in total private employment data. This report and the NonFarm Payrolls, the number of new jobs created outside the agricultural sector, are believed to represent the real state of the labor market. And a stable labor market is one of the most important conditions for economic growth. In case with the US, it will reveal the pace of economic recovery from the pandemic. Thus, a reading higher than 950,000 could trigger more buy positions on the US currency. Other economic reports are unlikely to cause any serious fluctuations in the market.
Possible scenarios for September 2
1) We do not recommend that beginners place buy positions on the pair at this time, since the pair has already consolidated below the uptrend line. So, the trend has now reversed to the downside. In the near future, the pair may still resume its uptrend, and the ascending line will change its position to a less steep decline. Thus, those who want to open buy deals should closely monitor the price movements.
2) Sell position look more relevant now. But as we mentioned above, the overall weak demand for the US currency and the possible resumption of the uptrend with a change in the trend line may cancel the downtrend movement. In any case, novice traders can leave their short positions open for now with the target at 1.1891. Once the MACD indicator turns upwards, you can close short deals.
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 better to trade now.
Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.
The MACD indicator 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 that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid sharp price fluctuations.
Beginners on Forex should remember that not every single trade has to 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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