Hourly chart of the EUR/USD pair
The EUR/USD pair was moving up on Tuesday, and it rose to the 1.2309 level, which is the peak for the last 2.5 years. Thus, with a high degree of probability, the EUR/USD pair will reach this level again. If the quote rebounds from it again, then a new round of the downward movement may begin. If it surpasses the level, the upward trend will resume. Let us remind you that earlier, the pair's quotes settled below the rising trend line, which, according to all the canons of technical analysis, means that the trend has changed to the opposite. But in practice, we see a different picture. The pair's quotes have the highest chances for a new round of upward movement. Thus, until the quote surpasses the 1.2309 level, there are still chances for a new round of downward movement, which can even be worked out, but in general, the chances of a new downward trend are quite low right now. In our morning review, we advised you to sell the pair on a new sell signal from MACD. Such a signal was generated, but it turned out to be false, so novice traders could lose about 15 points. It is okay, it happens. Now you need to wait for new signals and strictly adhere to the trading strategy.
No important macroeconomic reports were released in the EU and the US on Tuesday. At least not a single one that would affect the movement of the euro/dollar pair. The ISM PMI in the US manufacturing sector exceeded the forecasted values, but did you see the dollar increase by at least a couple of dozen points today? The dollar rose by 20 points at the very beginning of the US trading session, but can such a movement be called growth at all? No other important reports and news today.
On Wednesday, January 6, you can pay attention to the EU's index of business activity in the services sector, meanwhile, in the US, look into the minutes of the last Federal Reserve meeting, which will be published late in the evening. However, both events have a rather formal character and there is a 90% probability that they will not provoke any reaction. From the PMI, we can only understand how bad things are in the EU services sector after a month of quarantine. The worse things are, the more chances for the economy to contract in the fourth quarter. However, the euro does not really need support now. Its growth is likely to continue no matter what.
Possible scenarios on January 6:
1) Long positions are not relevant at the moment, since quotes have settled below the trend line, and the previous local highs have not yet been updated. Thus, in order to be able to re-consider buying the pair, you need to wait for a new upward trend or until the quote settles above the 1.2309 level following the results of the next hourly candle. In this case, you are advised to trade bullish with targets at the resistance levels of 1.2342 and 1.2374.
2) Trading for a fall still looks more appropriate. You are advised to open new short positions while aiming for 1.2263 and 1.2216 on a new sell signal from MACD (if the price remains below 1.2309) or in case of a rebound from 1.2309. Formally, a downward trend has been created, but in fact the price is only 10 points from the 2.5-year highs. Therefore, the probability of bringing back the upward trend is very high.
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.
