Hourly chart of the EUR/USD pair
The EUR/USD pair began to correct on Thursday, September 3 and continued to do so throughout the day. The MACD indicator produced a signal for the correction, which was quite timely. As we expected, the pair needed to correct after almost two days of continuous decline. Trading during the day was extremely calm, and no new sell signals were formed. Thus, at the moment, novice traders can take a rest until the MACD produces a new signal. The trend is currently downward, so we continue to work on sell signals. Unfortunately, it is quite problematic to build a downward trend line or channel, since there are practically no reference points for these patterns at the moment. In general, we continue to consider the option of quotes falling to the 1.1700 level as the working course of action.
There have been quite a large number of data releases of various kinds both in the European Union and America today. For example, the business activity index for the service sector was published in the European Union, which was slightly higher than expected. Also, the EU published a report on changes in retail sales, which was much worse than expected (the decrease was 1.3% compared to the previous month). Meanwhile, the report on the balance of foreign trade was released in the United States, which reached -63.6 billion dollars in July, which means that America sold goods and services worth 63.6 billion less than they purchased. A negative trade balance is considered a negative factor for a country and its currency, but in this case, it is absolutely normal. But the number of new applications for unemployment benefits was 881,000, not 955,000, as expected by traders. The ISM index of business activity in the service sector was 0.1 lower than forecast, which is not critical at all. In general, there was a lot of macroeconomic data, but the markets were not really impressed with any of them. The most important ISM index almost completely coincided with the forecast value and market participants were not impressed either. Therefore, it is quite understandable that it was a quiet trading day.
All of the major events on September 4, Friday are to be expected in the United States. First, the unemployment rate will be released, which, although it began to decline in recent months, still remains at a very high level (10.2% in July). Second, the number of new jobs created outside the agricultural sector will be published, which is the number one report in terms of relevance for determining the state of the labor market. Thirdly, changes in average wages will be released. However, the most important report will of course be the Nonfarm Payrolls (item number 2).
Possible scenarios for September 3:
1) Novice traders are advised to not consider buy positions at this time, since the pair has settled below the upward trend line, so the trend has now changed into a downward trend. There are no signals or technical patterns that currently support the upward trend. Therefore, buyers have to wait for trend lines or channels that would show an upward trend.
2) Sell positions continue to look more relevant, but after a two-day drop in quotes, an upward correction has begun. Thus, novice traders are advised to wait until it ends and can only consider opening new short positions after the MACD indicator has turned down. The closer the MACD indicator turns to zero, the better. A reversal may occur tonight, but we recommend evaluating the situation 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 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.
