Hourly chart of the EUR/USD pair
The EUR/USD pair rebounded off the downward trend line on Thursday, October 15, as we expected in the morning, which served as a signal to open new short positions with targets at 1.1720 and 1.1696. Even if novice traders opened sell orders based on a downward reversal of the MACD indicator, they still made a profit of around 40 points, which is an excellent result since the current volatility isn't too high. The pair reached the 1.1696 level at the end of the day, which has been the lower border of the horizontal channel of $1.17-1.19 for a long time. Thus, it is likely that the price would rebound from this level, as well as an upward movement. The downward trend line still supports bearish traders, so the downward trend persists until the price settles above this line. However, do not expect that quotes would fall even deeper unless the 1.1696 level is overcome.
No macroeconomic background for the EUR/USD pair for the second day. European Central Bank President Christine Lagarde delivers a speech almost every day, but she does not say anything new and important, therefore, market participants do not react to her speeches. Apart from this, traders do not have any information at their disposal. There have been no important macroeconomic reports in recent days either, although market participants still ignore them in the last six months. A secondary report on claims for unemployment benefits in the United States was published today, which showed a decrease in the overall unemployment rate in the country, but the euro (a decrease in the euro/dollar pair) did not rise due to this report. Moreover, it might not have been provoked at all. That is, the movement could be purely technical.
Today, the European Union is scheduled to publish its inflation data for the month of September. As we have said more than once, the market does not significantly react to any of the reports right now. However, if this report turns out to be extremely weak, then the US dollar may continue to strengthen. And there is no reason to expect that EU inflation would accelerate. Deflation is projected to remain at -0.3% y/y. If the real value of the indicator becomes even worse, this may support demand for the dollar. We can also expect reports on retail sales and industrial production in the United States. And the same goes for these reports. If the real numbers differ greatly from the forecasted ones, then traders might react to these two reports. Otherwise, they will be ignored. The general fundamental background is also not too abundant, since we have not received any new important report from the political sphere of the US or the EU either.
Possible scenarios for October 16:
1) Buy positions the EUR/USD pair remain irrelevant at the moment, since the pair has left the ascending channel. However, if the price settles above the new, downward trend line, then novice traders can open long positions with targets at the resistance levels of 1.1771 and 1.1796. The trend line is unlikely to be broken over the next few hours, so you should wait for tomorrow morning anyway.
2) Sell positions are still relevant at the moment. However, traders failed to overcome the 1.1696 level on the first try. By and large, there is not even a signal to close short positions at the moment. However, we recommend opening new sell orders if the 1.1696 level is overcome or after a new round of correction to the trend line, after which the MACD indicator will again form a sell signal.
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.
