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Hourly chart of the EUR/USD pair
The EUR/USD pair began a new round of downward movement last night. The trend line that has supported the upward movement several times is no longer relevant. The pair's quotes settled below it yesterday, so there is no upward trend. Thus, you can now consider short positions in hopes that this time the trend reversal will mean some tangible downward movement, and not 30 points. Let us remind you that just a few days ago the price also settled below the previous upward trend line. Then it fell by another 30 points and resumed the upward trend. In general, we can say that it is absolutely not a favorable time for trading right now, especially for beginners. On the one hand, the upward trend remains, on the other hand, it is extremely difficult to work it out. Maybe the holiday factor is still working. Maybe traders themselves understand that the euro has climbed unprecedentedly high, where it does not belong, given the fundamental factors. The fact remains. There is no movement according to the textbook now - the main movement, correction, new signal according to the trend. Quotes move absolutely chaotically. Trendlines are often ignored. Signals are often either false or weak. Thus, beginners should clearly understand the essence of the market at a given time.
There is still little to say in terms of foundation. Ordinary macroeconomic reports have recently been published in the US and the European Union, which, of course, did not have any particular impact on the pair's movement. Yesterday, for example, it became known that business activity in the services sector of the eurozone fell to 46.4, but the euro was growing at that time. The ADP report was released afterwards, which showed the reduction in the number of employees in the US private sector, and so what? At this time, the US dollar was strengthening (falling EUR/USD = rising dollar). Thus, the markets successfully ignored all the reports yesterday. However, this is understandable, since the euro has been growing without stopping for two months now, and the general trend has been 10 months. Naturally, yesterday's publication of the minutes of the last Federal Reserve meeting did not cause any reaction either. EU inflation for December will be released today, which is likely to remain negative and could cause the euro to fall, while the US ISM Service PMI will be released in the afternoon, which could support the US dollar.
Possible scenarios on January 7:
1) Long positions are no longer relevant again, if you follow the canons of technical analysis, since the trend line is crossed. Thus, those who wish to buy the EUR/USD pair in such a market should wait for a new upward trend or at least a strong buy signal. For example, rebounding from a trend line, which we deliberately left in the chart. Considering how the pair is moving now, it is possible that this irrelevant line will still be followed by a rebound. The targets for growth are 1.2361 and 1.2397.
2) Trading for a fall is more relevant now, since buyers did not keep the pair above the trend line. Thus, you are advised to open new short positions (at your own peril and risk) while aiming for support levels of 1.2278 and 1.2231, since the MACD indicator created a sell signal a couple of hours ago. However, you should remember that many signals are false now, and this is not the most favorable time to trade.
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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