Hourly chart of the EUR/USD pair
The EUR/USD pair corrected by only 16 points last Tuesday night and immediately moved up. Therefore, novice traders did not receive a clear buy signal, despite the upward trend. The MACD indicator did not discharge to the zero level and did not even come close to it. So in our opinion, the technical picture does not justify the new longs, especially for beginners. Of course, the market will not generate perfect signals every day. However, novice traders are advised to look for such signals or something close to it. The upward trend line is currently relevant, but the price can still settle below it at any moment, since it has a fairly strong slope. The pair's quotes continue to move confidently in the direction of the upper border of the horizontal channel at 1.1903. We do not see the pair above this level yet. Getting the price to settle below the trend line will make it possible for sellers to enter the market, since the pair will start aiming for the lower border of the 1.1696 horizontal channel.
The fundamental background for the EUR/USD pair remains unchanged. We did not receive much news from the European Union and the United States in the last two days. If you try to link the euro's upward movement and the fundamental background, you will hardly be able to do so. There was no macroeconomic statistics and there won't be any today as well. Speeches by Federal Reserve Chairman Jerome Powell and European Central Bank President Christine Lagarde happen almost every day and, of course, the heads of central banks find it very difficult to surprise the markets and provide us with new information. Thus, in the overwhelming majority of cases, no reaction to these events follows. Today, for example, Lagarde is set to deliver another speech. There is also some news coming from the US. The topic of the presidential election is still the most important, but the markets are already tired of the flow of information related to the candidates and their confrontation. And it seems that investors are no longer interested in the topic of coronavirus in the United States, since high incidence rates continue to be reported in this country, but there is no news in the media about this. A strong second wave of the pandemic began in Europe, but the euro is still growing. Thus, it is absolutely unrealistic to figure out what exactly market participants are reacting to and what kind of news they are interested in. We are inclined to the option that the macroeconomic and fundamental backgrounds are not important at all now, and trading proceeds exclusively on technical factors.
Possible scenarios for October 21:
1) Buy positions on the EUR/USD pair remain relevant at the moment, since the price continues to trade above the rising trend line. Novice traders are advised to wait for a new round of downward correction, discharge of the MACD indicator and a new buy signal in order to open new long positions while aiming for 1.1855 and 1.1888. Also, if one of the traders has opened longs, then they can keep them until the MACD indicator turns down.
2) You are advised to return to taking sell positions on the currency pair, but first the price should settle below the rising trend line. In this case, the price could tumble with the first targets at the support levels 1.1774 and 1.1726, and in general it will aim for the lower border of the horizontal channel at 1.1696, from which it has rebounded several times.
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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