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Hourly chart of the EUR/USD pair
The EUR/USD pair began a round of upward correction within a new downward trend last night, which was created after the price settled below the upward trend line (marked with a dotted line). Thus, at this time, novice traders are advised to monitor sell signals, although in general the pair continues to trade near its 2.5-year highs. Last night we recommended keeping short positions open. Unfortunately, the downward movement did not continue, although it looked quite promising. However, nothing terrible happened for traders. If you close sell orders now, the profit will be zero. If traders closed short positions on the signal of the MACD indicator up (circled), they could even make a profit of about 10 points. So in any case, there should be no losses. But in the next few hours a new sell signal from MACD may appear. The indicator was sufficiently discharged last night, therefore it can form a strong sell signal. However, as before, much will depend on the market sentiment, since both the euro and the pound's growth is more speculative now than ever, and there are very few fundamental factors and macroeconomic reports at the moment.
In terms of foundation, there is now generally little that can be said. Literally a couple of reports were published in Europe and the US yesterday, which did not particularly affect the mood of traders. The ISM Manufacturing PMI, which is considered important, will be released today, but the problem is that it is likely to be well above the 50.0 mark, so it will only testify to the good state of manufacturing in the US. Given that markets are still refusing to buy the dollar, this index is unlikely to greatly help the US currency. Most importantly, now there is no fundamental background that would reasonably push the pair in one direction or another. Now everything is simple on the market - the dollar is getting cheaper, the euro is getting more expensive, and nobody is interested in the reasons for this movement. Fundamental background, macroeconomic indicators do not support the euro's growth now. However, this is exactly what is happening. Thus, the factors, thanks to which the market is now moving, are different from the usual ones. This should be borne in mind, especially for novice traders who now find it difficult to understand what is happening in the market.
Possible scenarios on January 5:
1) Long positions have lost their relevance at the moment, as quotes have settled below the trend line, and the previous local highs have not been updated. Thus, in order to be able to re-consider buying the pair, it is necessary to wait for a new upward trend or an eloquent cancellation of the downward trend that exists at the given time.
2) Trading for a fall looks more appropriate right now. You are advised to open new short positions with targets at support levels 1.2216 and 1.2184 on a new sell signal from MACD. Formally, a downward trend is now formed, but in fact the price is only 40 points from the 2.5-year highs. Therefore, the likelihood of bringing back the upward trend is also high.
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 (14,22,3) 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 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 a sharp price reversal.
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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