Hourly chart of the EUR/USD pair
The EUR/USD pair began a long-awaited correction. It managed to rise to the 1.1903 level, from which the price had repeatedly rebounded earlier. Moreover, both above and below. Thus, this time the pair's quotes returned to this level and at the moment everything looks like a rebound. The MACD indicator can also turn down at the current candle, thus forming a sell signal. This signal will be strong, since the indicator has previously increased to the zero level and even above it. Plus a rebound from the 1.1903 level. Not a single signal was generated during the day. In our last review, we advised you to consider trading bearish if there is a signal from MACD to sell (there was no signal yet), or to buy if the price breaks the trend line (did not happen). Therefore, novice traders can only open short positions on the current sell signal. Since it is already evening and the deal will most likely have to be left overnight, we recommend setting Stop Loss to breakeven before going to bed. To do this, the price needs to go down 15-20 points after the point of entry into the market. In general, the downward trend remains, therefore, short positions remain relevant.
The European Union published macroeconomic reports on Tuesday, which is the GDP for the fourth quarter in the second estimate. It turned out that the most important indicator of the state of the economy was revised for the better and now in the last quarter of 2020 the economy it fell by 4.9% y/y, rather than 5.0% y/y. However, to be honest, this consolation is weak for the European economy and the euro. Take note that the euro's growth during the day was not associated with this report, since the upward movement began several hours earlier. Thus, it is more likely that this report might even be responsible for stopping the euro's growth, since the quarterly change in GDP was revised downwards.
The most important report on Wednesday is the US inflation. Recall that the Federal Reserve and traders are waiting for its acceleration, which will cause a number of processes and changes in the economy and monetary policy. The Fed expects inflation to be 2% or higher. At the moment it is 1.4% y/y and is forecast to increase to 1.7% y/y in February. Thus, the fulfillment of the forecast may have a favorable effect on the US currency on Wednesday.
Possible scenarios on March 10:
1) Long positions are currently irrelevant. You can buy the pair when it has finally surpassed the downward trend line, that is, after canceling the downward trend. Take note that if a signal was formed, the price has already traveled a long distance, then the residual momentum can be extremely weak. At the moment, buyers have not even been able to overcome the 1.1903 level.
2) Trading bearish looks more appropriate now, and the corresponding signal from the MACD is either already formed, or will be formed in the next hour. When a clear signal is formed and profit worth 15-20 points has been accumulated, then we recommend setting Stop Loss to breakeven. But the targets are located near the support level of 1.1815, but, most likely, the price will not reach it, so we recommend taking profit when passing 40-50 points in the right direction.
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.
