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16.12.2021 10:23 AM
Analysis and trading tips for EUR/USD on December 16

Analysis of transactions in the EUR / USD pair

EUR / USD rose by 15 pips on Wednesday, thanks to a signal to buy that appeared when the MACD line was in the oversold area. It allowed traders to safely take long positions, provoking an increase in the pair. In the afternoon, a signal to sell emerged, and this time it led to a 10-40 pips decrease because the MACD line was below zero.

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Inflation data in Italy and France did not affect the market, most likely because traders were focusing on the Federal Reserve, which gave expected decisions on monetary policy. That was why dollar rose against other currencies yesterday.

But today the euro could grow if the upcoming data on the Euro area exceed expectations. Good performance in the manufacturing and services sectors will provide support to EUR/USD, as will a decrease in the number of omicron patients. Hawkish statements from the European Central Bank will affect price movements as well.

In the afternoon, the US will release reports on jobless claims and industrial production. A decrease in the first and an increase in the second indicator will have a positive effect on dollar, but the data are unlikely to reverse the trend that will be formed after the meeting of the ECB. US PMI could help dollar partially as it is already at a high level and is unlikely to exceed them.

For long positions:

Buy euro when the quote reaches 1.1305 (green line on the chart) and take profit at the price of 1.1342. Growth will be observed if composite PMI in the Euro area exceeds expectations. The decisions and announcements of the European Central Bank will affect price movements as well.

Before buying, make sure that the MACD line is above zero, or is starting to rise from it. It is also possible to buy at 1.1280, but the MACD line should be in the oversold area, as only by that will the market reverse to 1.1305 and 1.1342.

For short positions:

Sell euro when the quote reaches 1.1280 (red line on the chart) and take profit at the price of 1.1233. Weak data on the eurozone economy will provoke a decline in EUR / USD because that will indicate that there is a need for more stimulus to sustain recovery.

Before selling, make sure that the MACD line is below zero, or is starting to move down from it. Euro could also be sold at 1.1305, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.1280 and 1.1233.

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What's on the chart:

The thin green line is the key level at which you can place long positions in the EUR/USD pair.

The thick green line is the target price, since the quote is unlikely to move above this level.

The thin red line is the level at which you can place short positions in the EUR/USD pair.

The thick red line is the target price, since the quote is unlikely to move below this level.

MACD line - when entering the market, it is important to be guided by the overbought and oversold zones.

Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes.

And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decisions based on the current market situation is an inherently losing strategy for an intraday trader.

Jakub Novak,
Analytical expert of InstaForex
© 2007-2023
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