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1-hour chart for EUR/USD
On Monday, EUR/USD went on trading lower. This move was less expected than an upward correction. In the previous article, I told you that the market is on edge now and its moves are erratic. A move downwards on Monday was triggered by other drivers than the fundamental background or macroeconomic stats. The economic calendar lacks important reports as usual on Monday. That news which became known over the weekend made the opposite impact on EUR/USD. When it comes to macroeconomic data, we will discuss it a bit later. All in all, beginners should be aware that the currency pair is making a clear-cut downward move which cannot be worked out through available technical tools. We've already discussed that every trading system focuses on a definite move (roughly speaking). There are some trading strategies which make gains in a range-bound market but fail in a trending market and vice versa.
What I suggest to beginners is an easy-to-understand system. However, it is not intended for trade under the current market conditions. In other words, in the ongoing situation we should either use different tools for analysis or wait until price moves become ordinary with corrections and retracements. Another remark is that MACD indicator is not able to discharge to zero as a nonstop downward move prevents it from doing so.
On Monday, March 1, traders got to know services PMI for the EU countries. The manufacturing index was released by the Institute for Supply Management. Bearing in mind that the US dollar was asserting strength for the whole day, we conclude that the statistics released today was neglected by the market. In fact, the reports published today were of secondary importance. Last week, a lot of market moving data were on investors' radars. So, today we can say that the market ignored weak economic data. The question is why EUR/USD carried on with its decline instead of starting an upward correction. Indeed, there were no factors to push the price further down. Today, ECB President Christine Lagarde delivered a speech, but she didn't say any market-moving remarks.
On Tuesday, the only meaningful report will be the consumer price index for the EU. However, the market is likely to take no notice of it again, unless the actual reading is much stronger than expected. In this case, the market will respond. Nevertheless, all we can do is wait for an upward retracement because there are no factors for a further decline of EUR/USD.
The following scenarios are possible on March 2
1)Long positions are out of the question for the time being. The market situation remains confusing and weird. On Tuesday, there is a strong likelihood of EUR/USD growth, but the price has overcome both trendlines. There is no new bearish trendline. Thus, it would be better for beginners to wait until the downtrend is clearly over. This could take a few days. At present, no signs are detected for an upward correction.
2)Trading lower makes sense at the moment because both trendlines have been broken. The price has already moves 215 pips downwards that suggests an upward retracement. Thus, once an upward correction is over, we will be able to monitor new sell signals by MACD indicator. Probably, a new downward trendline or a channel will have been formed by that time. Targets for short positions will depend on how deep a correction will be. I would recommend placing a Take Profit 40-50 pips away from the market entry point.
What's on the chart:
Support and Resistance levels are the levels that are targets when opening buy or sell orders. Take Profit levels can be placed near them.
Red lines are channels or trend lines that display the current trend and show which direction it is preferable to trade now.
Up / down arrows show whether the pair should be traded up or down when reaching or overcoming particular obstacles.
MACD indicator (14,22,3) - a histogram and a signal line. When they are crossed, this signals a market entry. It is recommended for use in combination with trend patterns (channels, trend lines).
Important speeches and reports in the economic calendar can greatly influence the movement of the currency pair. Therefore, during their release, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners in the forex market should remember that every trade cannot 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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