Trade Analysis and Tips for Trading the European Currency
The test of the 1.1200 level occurred when the MACD indicator had already moved significantly above the zero line, limiting the pair's upward potential. For this reason, no euro purchases were made, and the entire upward move was missed.
The euro moved sharply higher in response to the eurozone's October manufacturing PMI survey, which came in above expectations despite a slight decline in the index itself. After reaching 52.9 in September, the PMI fell back to 52.7, matching the August reading. Nevertheless, the index has remained in expansion territory above 50 for the ninth consecutive month.
However, the most disappointing news for the euro during the first half of the day came from German retail sales. In September, they fell by 2.0%, compared with expectations for a 0.4% increase. This indicator measures the volume of goods sold by retailers, so such a significant deviation from forecasts points not to a one-off fluctuation but to a notable cooling in consumer demand in the region's largest economy. Weak consumer demand reduces price pressures and strengthens the arguments of those advocating a more accommodative ECB policy.
Later, the U.S. ISM Manufacturing PMI will be released, with a forecast of 54.7 following the previous reading of 54.5. September construction spending data will also be published, with an expected increase of 0.3% following a 0.9% rise. Strong U.S. data would support the dollar and could push EUR/USD lower again, while weak figures would give the euro an opportunity to recover some of its losses following the disappointing German retail sales report.
As for the intraday strategy, greater emphasis will be placed on the implementation of Scenarios No. 1 and No. 2.
Buy Signal
Scenario No. 1: Today, the euro can be bought when the price reaches the 1.1220 level (the green line on the chart), with a target of 1.1259. At 1.1259, the position will be closed. The euro can also be sold at that level, targeting a move of 30–35 points from the entry point. The euro may rise today if U.S. economic data is weaker than expected. Important! Before buying, make sure that the MACD indicator is above the zero line and has only just started moving higher from it.
Scenario No. 2: The euro can also be bought today if the price tests the 1.1200 level twice consecutively while the MACD indicator is in the oversold area. This would limit the pair's downward potential and trigger an upward market reversal. A rise toward the opposite levels of 1.1220 and 1.1259 can be expected.
Sell Signal
Scenario No. 1: The euro will be sold after the price reaches 1.1200 (the red line on the chart). The target will be 1.1157, where the position will be closed and a buy position opened immediately in the opposite direction, targeting a 20–25-point move from that level. Selling pressure on the pair is likely to return if U.S. data exceeds expectations. Important! Before selling, make sure that the MACD indicator is below the zero line and has only just started moving lower from it.
Scenario No. 2: The euro can also be sold today if the price tests the 1.1220 level twice consecutively while the MACD indicator is in the overbought area. This would limit the pair's upward potential and trigger a downward market reversal. A decline toward the opposite levels of 1.1200 and 1.1157 can be expected.
What the Chart Shows
- Thin green line – the entry price at which the trading instrument can be bought.
- Thick green line – the estimated price at which Take Profit orders can be placed or profits can be closed manually, as further gains above this level are unlikely.
- Thin red line – the entry price at which the trading instrument can be sold.
- Thick red line – the estimated price at which Take Profit orders can be placed or profits can be closed manually, as further declines below this level are unlikely.
- MACD indicator. When entering the market, it is important to consider the overbought and oversold areas.
Important. Beginner Forex traders should make market-entry decisions with great caution. Before the release of important fundamental reports, it is generally best to stay out of the market to avoid exposure to sharp exchange-rate fluctuations. If trading during news releases, always place stop-loss orders to minimize potential losses. Without stop-loss orders, the entire trading account can be depleted very quickly, especially when large position sizes are used without proper money management.
It is also important to remember that successful trading requires a clear trading plan, such as the one presented above. Making spontaneous trading decisions based on current market conditions is a fundamentally losing strategy for an intraday trader.
