EUR/USD hourly chart
On Wednesday, October 7, EUR/USD entered a phase of an upward correction that we have already mentioned earlier. In the course of the day, the price reached the first resistance level of 1.1784 from where it is likely to reverse to the downside. Yesterday, the price consolidated below the ascending trendline, which is why the uptrend was canceled. Now we are waiting for at least one more round of the downward movement. The MACD indicator has successfully reached the zero level. So, it can form a sell signal in the near future. However, the current scenario may be canceled if the price tests a new high of 1.1808. In this case, the MACD indicator may not even turn to the downside, but will simply continue to move up. Anyway, we prefer to stick to the first scenario.
On Wednesday, no important macroeconomic news was released both in Europe and the US. It seems, however, that these days the markets are paying zero attention to the statistics, so this fact did not really matter. Today, a report on industrial production in Germany was published, showing a 0.2% decrease on a monthly basis in late August. Therefore, we can assume that this important economic indicator will begin to decline throughout the European Union, and this is bad news for the euro. The recent speech of ECB President Christine Lagarde did not provide the markets with any new clues. The minutes of the latest Fed meeting are due to be published on Wednesday evening. However, we believe that the markets will not react strongly to this event. Moreover, the fundamental factors support the euro's growth, whereas the technical picture shows the opposite.
On Thursday, October 8, ECB Vice President Luis de Guindos will make a statement. Usually, his statements tend to influence the market sentiment. However, we think that this time the ECB has no more interesting news to announce. In addition to this event, the report on jobless claims in the US will be published. It is also unlikely to cause a strong market reaction. That is why we believe that tomorrow you should pay more attention to technical factors rather than news. What is more, a new sell signal can be formed as soon as today.
Possible scenarios for October 8
1) Buying the pair is not relevant at the moment, as the price has settled below the ascending trendline. Now, in order to open buy positions, you need to wait until a new uptrend or some strong buy signals are formed, such as a rebound from the level of 1.1696. This is the only case when we advise beginners to consider opening new long positions.
2) Selling the pair became relevant after the price started a downtrend. Earlier, we recommended that novice traders wait for an upward correction and its completion. Today, the correction has been completed by 50%. You just need to wait for a sell signal from MACD and open short positions with the target at the support level of 1.1707, located near the key level of 1.1696. This level represents the lower boundary of the sideways channel where the pair has been trading for a long time. Thus, the price may well rebound from it.
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.
