Hourly chart of the EUR/USD pair
The EUR/USD currency pair began a new round of corrective movement within a new (old) upward trend in the evening. As a reminder to novice traders, the upward trend line has been rebuilt and is now supporting bull traders again. However, we also recall a couple of other important factors that can greatly affect the pair's movement. First, the price continues to trade within the horizontal channel of $1.17-1.19. Since it has spent the last few days near its upper border, a downward reversal is highly probable and it could fall to the lower border of this channel. Secondly, although the trend line was rebuilt, the price failed to update the previous local high of October 22 at 1.1867. And this indirectly indicates the cancellation of the upward movement. Thus, we would say that the EUR/USD pair might return to the updated trend line in the near future and try to overcome it. Nevertheless, the upward trend remains, therefore, in the event of an upward reversal of the MACD indicator or an eloquent rebound from the trend line, you are still advised to trade upward.
The fundamental background for the EUR/USD pair in the new week can be downright boring, and it can also be quite interesting. There are few macroeconomic reports for the week. But traders ignore most of it anyway. There is not a single significant event scheduled for Monday. On the other hand, such an important event as the presidential elections in the United States is approaching. We have already mentioned why this is important. And most importantly, the markets can actively trade all pairs containing the dollar. That is, with the approaching elections, the volatility of the EUR/USD pair may significantly increase. Of course, this is not 100% certain. This is just a guess. But you need to be ready for this. Also, in the near future, we expect the pair to leave the horizontal channel, in which it has been trading for three months. Most likely, this will not happen before the end of the elections. However, we also remind novice traders that the 2020 US presidential elections can be fraught with fraud, litigation, and vote counting can take up to several weeks, as many Americans will vote by mail due to the difficult situation with COVID-2019. Therefore, it is impossible to predict how the markets will react to all these unusual events and what will happen if Donald Trump loses the election. As for the eurozone, the second wave of coronavirus continues to gain momentum, but so far the euro does not react too strongly to this news. Perhaps because the situation with COVID isn't any better in America?
Possible scenarios for October 26:
1) Buy positions on the EUR/USD pair remain relevant at the moment, since the upward trend line has been rebuilt and it supports buyers again. However, as we expected last night, a new correction has begun. Therefore, we recommend waiting the downward correction to be completed, a reversal of the MACD indicator to the upside and afterwards you can finally open new longs while aiming for 1.1888 and 1.1903.
2) It is not advised to trade for a fall at this time, since the upward trend line is in action again. Thus, in order to sell the pair, novice traders need to wait until the price settles below the trend line. In this case, shorts will become relevant while aiming for 1.1759.
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.