EUR/USD hourly chart
On Thursday, September 10, EUR/USD broke below the descending channel right after our morning publication. We recommended buying the euro with the targets at 1.1877 and 1.1903. Both targets were tested during the day, so novice traders could have earned from 40 to 65 pips. Congratulations! At the moment, the price has tested the upper boundary of the flat channel and rebounded from it. Therefore, we expect the pair to resume the downtrend. The sideways channel of 1.17 - 1.19 is still in place, and the quotes have been stuck there for month and a half. Thus, we now expect a downward movement. Unfortunately, it is not possible to see the formation of new trend lines or channels at this time. Therefore, you will have to trade for some time, watching closely for buy and sell signals.
The fundamental background was quite important today. However, the reaction of the market was unexpectedly opposite to the decisions taken by the ECB. In fact, the European Central Bank made no decisions at all. The rates remained unchanged, the QE and PEPP programs, which stimulate the economy, implying buybacks from the open market and flooding the economy with cash, also did not change. Moreover, there was not even a hint that something will change in the future. Even so, this would be a bearish factor for the pair. Besides, there was nothing optimistic about Christine Lagarde's speech. The ECB President said that monetary policy will remain "soft" for a long time, as inflation is now at a very low level, and it is still very far from a full economic recovery. The only positive thing was an improved outlook for GDP for 2020 which is seen at -8%. However, these estimates can be hardly called optimistic. Thus, according to the fundamental background, there were simply no reasons for buying the euro today. But such situations sometimes happen in the foreign exchange market. That is why we believe that later on Thursday and on Friday morning we will witness a downward movement simply because the euro was overrated.
On Friday, Germany and the United States will publish Consumer Price Index for August. While the data from Germany is not so important for us, the data on the US inflation rate may affect the euro/dollar trajectory. A better-than-expected reading will push the US dollar higher. If the report turns out to be worse than forecasted, then the euro may advance on the last trading day of the week.
Possible scenarios for September 11
1) Beginners are not recommended to open buy deals at this time, as the price hit the upper boundary of the channel at 1.1903, but failed to break above it. Therefore, further uptrend is very unlikely. Also, there is currently no pattern supporting the bullish trend.
2) Sell positions look more relevant at the moment, despite the fact that the pair went considerably higher during the day. However, the rebound from the level of 1.1903 signals a new round of the downward movement to the lower boundary of the 1.17-1.19 flat channel. We would recommend placing short positions amid the fall in price. Yet, you should have entered the market a little earlier at the time of the rebound from 1.1903. Therefore, it might be better to wait until the morning and make a new assessment of the current market situation.
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 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.
