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EUR/USD hourly chart
EUR/USD trading was very hectic on Wednesday, November 4. In our morning review, we recommended that novice traders wait for the markets to calm down. Actually, this was the right decision. Although the price was moving in one direction, a sharp change in the trend could happen at any time. The markets are still excited. In such conditions, the price can abruptly change its direction by 100-150 pips. There is no clear trend at the moment, and we cannot say for sure whether there is an uptrend or a downtrend. On the chart, no trendlines or trend channels are observed. Even the MACD indicator fails to keep pace with the price and generates signals with a delay. Therefore, we believe that beginners should stay out of the market now and wait for the trend formation and average volatility levels.
On Wednesday, several major economic reports were published in the US and the European Union. Let's pay attention to the Services PMI in the EU, which remained below the 50.0 mark. Likewise, a similar ISM index in the US remained above the 50.0 mark. Thus, the EU services sector stays rather weak, and the situation may deteriorate in the near future due to the introduced lockdowns in many European countries. However, there was a negative factor for the US dollar, as the ADP report on private employment sector turned out to be worse than expected. During the day, market participants were mainly focused on the votes counting in the US presidential election. At the moment, the calculation has not been completed yet, which means that markets can immediately react to any new data. The final results will be ready in several days due to the postal vote system. Letters with ballots may arrive late at polling stations. This means that the markets may stay in an agitated state for several more days.
On Thursday, November 5, a report on retail sales is due to be published in the EU. However, it is unlikely to cause any market reaction. Later in the day, a more important event will take place. The US Federal Reserve will release the minutes of its latest meeting. The Fed is expected to leave its monetary policy unchanged. However, markets will look for important clues during the press conference. This will be happening in the evening, while during the day, the update on the ballots count will be available. It doesn't really matter who of the two candidates will be leading. In any case, trading will be extremely hectic tomorrow.
Possible scenarios for November 5
1) Buying the EUR/USD pair became relevant after the price had settled above the descending channel. However, at this time, the pair tends to quickly change its direction, and the movement itself can be very strong. The pair has already moved up by 100 pips, and the uptrend is unlikely to continue. In general, it will be extremely difficult to receive clear buy signals today and tomorrow. The fundamental factors will strongly influence the market sentiment on Thursday.
2) Selling the pair is no longer relevant although the probability for a new drop is high. In theory, beginners may try to use a new sell signal from the MACD indicator with the target at 1.1651. Do not forget to set the Stop Loss. We recommend that novice traders wait for the markets to calm down.
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 trendlines 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, and 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 patterns (channels and trendlines).
Important announcements and economic reports that you can always find on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend 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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