Hourly chart of the EUR/USD pair
The EUR/USD pair settled below the upward trend line on Wednesday, August 26, which was built the day before. Back in the morning review, we warned that, most likely, this line will be crossed. And so it happened. But, unfortunately, there was no strong downward movement, that is, the US dollar did not strengthen again. The pair went down by about 35 points, did not reach the second target of 1.1761 and turned upward in the US trading session for no apparent reason. Thus, at this time, novice traders can close short positions at zero profit and wait for new signals to sell. The MACD indicator has already confirmed that the downward movement has been postponed through a reversal to the upside (circled in red). Things are now much more complicated when it comes to long deals. On the one hand, the markets are clearly unwilling to buy the dollar, which increases the likelihood of buying the euro. On the other hand, in general, the movement continues in a sideways channel between the levels of $1.17 and $1.19. On the third hand, there are currently no new patterns supporting the upward movement. Therefore, buy signals based on technical analysis should be ignored altogether.
There were few macroeconomic events on Wednesday. First of all, it is necessary to take note of the report on orders for durable goods in the US, which is quite important and often affects the movement of the pair. Despite the fact that all four derivatives exceeded forecasts, the US dollar did not receive any market support. Instead, it began to decline in the afternoon, although the logical reaction of the market would have been to make long deals. There was no other important news during the day.
America will host the annual Economic Symposium in Jackson Hole on August 27, Thursday, which will feature prominent economists and central bank governors from many countries. Novice traders should pay attention to the speech of Federal Reserve Chairman Jerome Powell. With a high degree of probability, Powell will touch on the topic of US monetary policy, so this speech may cause a reaction from traders. In addition, the US will publish reports on GDP for the second quarter (second estimate) and on claims for unemployment benefits. We believe that there will not be much reaction to these reports, as the markets have already won back the information that the US GDP will collapse by 33% in the second quarter. Nevertheless, if the actual value of the report is much higher than the forecast (-32.5%), it may support the dollar in the afternoon.
Possible scenarios for August 27:
1) Novice traders are recommended to not consider buying the pair at this time, since the price has broken the ascending trendline, and there are no new patterns supporting the upward movement at the moment. Thus, to buy the pair, you need to wait for a short-term upward trend to form and the corresponding buy signals.
2) We recommend considering sales when forming a new signal from the MACD indicator. However, take note that if the price goes above the previous local highs (1.1844 and 1.1850), then this will mean that the upward movement may resume and selling the pair will no longer be relevant. Thus, we are waiting for the development of events and clarification of the situation.
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.
