EUR/USD hourly chart
On Wednesday, the euro/dollar pair tried to continue its uptrend in the morning session but failed to do so. We expected this scenario. In any case, it was necessary to wait for the formation of a trendline or a channel in order to get further direction for the pair. As a result, the pair formed a descending trendline due to the downward movement during the day. Therefore, short positions were more preferable as we had a downward movement. However, this trendline may turn out to be not fully completed. There are two peak points along which the trendline is built, but the second peak point may not be fully formed. To put it simply, the pair can make another round of an upward movement tomorrow and its high can become a peak for the trendline. At the moment, novice traders should not rush to open short positions. Moreover, a sell signal was formed during the day. However, it was not recommended to follow this signal as it was formed at night and was located much higher than the zero level. Yesterday, we said that in the best-case scenario the signal should be formed near the zero level. This time, it turned out that the indicator had already started to move down when the price was still in the flat channel formed at night.
On March 3, the EU released the data on business activity in the services sector for February. This indicator turned out to be lower than expected and below the previous value. So, the European currency was under pressure that morning. At the same time, the US services PMI, which also turned out to be weaker than projected, and the ADP report (which turned out to be significantly worse than traders' expectations), did not have any effect on the pair during the day. Thus, the markets reacted only to some statistical data.
On Thursday, the EU will publish the data on unemployment rate and the change in retail sales in January. Retail sales are expected to have declined in January, and the unemployment rate could rise by 0.1% to 8.4%. Thus, the forecasts are negative, and if they are confirmed, the euro may come under pressure again. So, the pair may start a new round of a downward movement on Thursday. Otherwise, traders may try to break through the current trendline.
Possible scenarios for March 4:
1) Long positions on the pair are not relevant at the moment as the situation is rather unclear. On Thursday, a new round of an upward movement is possible. The uptrend may be supported by the statistics from the Eurozone in the first half of the day. If MACD forms a buy signal near the zero level, it will be possible to open long positions with the targets at 1.2125 and 1.2160. In case the price rebounds from the trendline, you should close long positions.
2) Trading short looks more appropriate now, but it will require the formation of a sell signal from the MACD indicator during the day. The signal should be formed close to the zero level so that we can use it more efficiently. The targets are located at 40-50 pips from the entry point. When a clear signal is formed and a profit of 15-20 pips is accumulated, we recommend setting Stop Loss at the breakeven point.
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.
