EUR/USD hourly chart
On Wednesday, the EUR/USD pair started a new round of the downward movement from the very beginning of the session. In the course of the day, the MACD indicator did not turn upwards, which means that there was no buy signal. Moreover, the price made a new attempt to exit the ascending channel during the day. This time, the attempt was successful. Yesterday we assumed that the pair would not move far to the downside after exiting the channel. That was not the case, though. Actually, the pair managed to decline by another 70 pips. However, we recommended that novice traders place Take Profit 20-30 pips further after the signal was generated. This is the profit that beginners could have earned today. It is quite a good result, especially now when markets are nervous ahead of the announcement of the Fed's meeting outcome. Even if beginners wanted to exit a trade following the upward reversal of MACD, they would still close with profit. Since the price left the ascending channel, the pair is now trading in the downtrend. So, we would advise novice traders to trade short after the Fed meeting is over. At the moment, the price is still rising, although the results of the meeting have not yet been announced. It is better to wait until tomorrow morning and evaluate the technical picture. Only then, you can look for new entry points. In any case, to open new positions, you should wait for the beginning of an upward correction and for the MACD indicator to reach the zero level.
On January 27, no macroeconomic reports were released during the day. In two hours from the moment of publication, the Fed will announce the results of the meeting, and Fed's Chair Jerome Powell will start a press conference. Therefore, we recommend closing all positions for now, since market reaction to this even can be unpredictable. It is better to avoid risks. Some experts say Powell may announce a change in the volume of the quantitative easing program. These comments may trigger a strong reaction among traders.
Tomorrow, an important data on GDP for the fourth quarter will be published in the US. According to forecasts, GDP should grow by 4.2% for the reported period. If these figures are confirmed, the US currency may receive additional market support. Just after the pullback to the upside, the euro/dollar pair may start a new round of decline. Traders may also focus on initial jobless claims report. If their number is too high, the US dollar may come under more pressure.
Possible scenarios for January 28
1) Long positions are no longer relevant at the moment as the price has left the ascending channel. Thus, you can consider opening new buy positions only after a new uptrend (trendline or channel) has been formed. You should also wait for a clear cancellation of the downtrend which is unlikely to happen at least until tomorrow morning.
2) Trading short look a better option now. However, we do not recommend trading in the coming hours and during night time. You should wait until the markets calm down and the MACD indicator reaches the zero level. Only after that, you can follow new sell signals with the targets at the support levels of 1.2080 and 1.2051.
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 trendlines 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, and 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 patterns (channels and trendlines).
Important announcements and economic reports that you can always find on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exit the market in order to avoid sharp price fluctuations.
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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