Hourly chart of the EUR/USD pair
After a very slight correction, the EUR/USD pair went back to moving down on Thursday, October 29. A sell signal from MACD was generated and novice traders could also work it out.The euro/dollar pair fell by almost 100 points during the day, and traders could earn around 70 points of profit at the moment. Given the strength of the current movement and its fundamental foundations, the euro may well continue to fall. However, here we leave the decision at the discretion of the traders themselves. You can close short positions right now and go to bed calmly, you can wait for the MACD indicator to turn up. The problem is that this indicator has already fallen quite significantly, so if the price continues to drop, then it is not a fact that the indicator itself is the one responsible for it, which may simply start to discharge (indicator movement in the direction opposite to the price movement). As for the pair's future prospects, it is quite difficult to talk about them right now. Quotes have left the horizontal channel, now it does not affect trading in any way. The price has left the descending channel, it also has no value now. There are no new trend lines, so now you can trade exclusively using the MACD indicator. In any case, we recommend considering opening new positions tomorrow morning.
There were two fundamental events on Thursday that deserve attention. The report on US GDP for the third quarter showed an increase of 33.1%, which is higher than the forecasts of experts, and in general is a very high value. It means that the American economy is recovering at a very high rate, which provided support to the US dollar. On the contrary, European Central Bank President Christine Lagarde made very mild, dovish statements, noting that the growth in the number of infections with the coronavirus in the EU countries could again slow down economic recovery and put additional pressure on inflation. Therefore, Lagarde's words did not support the euro. As a result, the pair fell by100 points.
The EU will publish the most important data on GDP in the third quarter on Friday, October 30, as well as on inflation for October. The EU's GDP is expected to grow 9.0% in the third quarter, after falling 11.8% in the second quarter. Therefore, compared with the US GDP, we can say that the recovery of the eurozone economy is proceeding more slowly. However, if the real value of the indicator is above 9.0%, then we can expect the euro to slightly strengthen. Moreover, after such a tangible fall, a correction is in any case necessary. But the report on inflation might be extremely weak, or rather negative. Forecasts speak in favor of -0.3% y/y, which still means deflation or falling prices instead of rising. Negative inflation, from the ECB's point of view, is a negative phenomenon for the economy, therefore, the demand for the euro is unlikely to grow after this report.
Possible scenarios for October 30:
1) Buy positions on the EUR/USD pair are currently irrelevant. The price left the horizontal channel altogether, so now there are no preconditions for a new upward trend to form. For long deals on the pair, you need to wait, perhaps it could take several days. The most you can expect right now is an upward correction.
2) Trading for a fall at this time remains relevant, although the pair went down 180 points in two days. Thus, now we expect an upward correction, from which it will be necessary to "hop" further. A new downward channel might appear. As for the signals, you need to wait for the correction so that the MACD indicator is discharged and afterwards, wait for a new sell signal to appear. The pair is unlikely to begin and end a correction earlier tomorrow morning.
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.
