Hourly chart of the EUR/USD pair
The EUR/USD pair turned to the downside last Friday, even at night, and so it resumed the downward movement, according to the formed trend, which is supported by the descending channel. Thus, novice traders could enter short positions that day. A sell signal from the MACD indicator was created early in the morning, which is very convenient - beginners had time to enter the market in time, or enter it only with a slight delay. The indicator was pre-discharged almost to a zero level, so the sell signal was considered strong. As a result, the euro/dollar pair was in a recoilless upward movement all day and no upward signal was created. Thus, newcomers could not even close sell orders or even close them just before the end of trading on Friday. This would bring them around 70 points of profit, which is an excellent result. Thus, at the moment, the downward trend continues, the MACD indicator will turn to the upside in almost any case in the coming hours, since it has nowhere to go further, and traders are advised to wait for a new sell signal from MACD.
No macroeconomic reports from the European Union last Friday, January 15, so everyone focused on America. In addition to all the political upheaval, the US also released reports on retail sales and industrial production. If the first indicator turned out to be significantly worse than forecasts (-0.7% m/m), then the second one turned out to be better than forecasts (+ 1.6% m/m). In general, the package of economic statistics can be considered neutral. Again, the market response does not match the nature of the macroeconomic data. From this we can conclude that there was no reaction. The markets simply ignored the reports again. And they are not interested in politics at all. Donald Trump is leaving office after three days and whether he will be impeached or not isn't that interesting anymore. This figure will no longer have any influence on the economy and politics of the United States.
Another speech from European Central Bank President Christine Lagarde scheduled in the European Union on Monday, January 18. Recall that her first speech in 2021 did not provide any new information to the markets, although in general, her speeches are an important event. Thus, potentially Lagarde can say something new and interesting regarding monetary policy. But are the markets ready to process this information?
Possible scenarios on January 18:
1) Long positions are still irrelevant at the moment, since the downward trend remains in force. Those who wish to buy the EUR/USD pair should wait until the quotes settle above the descending channel. In this case, you can consider long positions with targets at support levels 1.2184 and 1.2216 (targets will be specified tomorrow morning).
2) Trading for a fall is more relevant now, so you need to wait for a new sell signal. You are advised to open new short positions with targets at the support levels 1.2080 and 1.2048 (to be specified in the morning), if a new MACD sell signal is created, which should be discharged to the zero level. Also, a rebound from the upper border of a new descending channel can be considered as a sell signal.
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.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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