Analysis of EUR/USD and trading tips
Friday was quite an active trading day. The first test of 1.0991, where I recommended selling the euro, took place when the MACD indicator began falling from the zero level, thus providing traders with a sell signal. However, the euro lost less than expected – just 25 pips. After that, the currency increased to 1.1025. The first test of the level occurred when the MACD indicator was far from the zero level, thus capping the upward momentum. As a result, the indicator did not give any buy signal. Traders had to switch to scenario 2. The second test of 1.1025, when the MACD indicator was in the overbought area, provided sellers with a perfect entry point. The pair slumped by more than 80 pips.
Data on Germany's consumer price index met the forecast and was ignored by traders. The fact is that the recent announcements made by Christine Lagarde unveiled further actions of the ECB. Meanwhile, the UoM consumer sentiment figures disappointed traders. It is obvious that US consumers will hardly be happy to see petrol at the price of $5 and inflation at 8.0% on a yearly basis. Early today, Germany will publish data on its wholesale price index, whereas France will report on its trade balance. The data will hardly affect the market since traders will be focused on the Eurogroup meeting and a monthly report prepared by the Deutsche Bundesbank. Forecasts provided by Germany's central bank may force traders to change their attitude towards risk assets, including the euro. In the second part of the day, the US is not planning to publish any reports. That is why the day is expected to be calm. The current market conditions are still encouraging buyers of the US dollar.
Signals to buy EUR/USD
Scenario 1: today, traders may buy the euro once it touches 1.0936 (a green line) with the target at 1.1001. At this level, it is better to close buy positions and open the opposite ones, expecting a rise of 20-25 pips. Today, the euro will hardly surge, only if data from France and Germany surprises traders. The euro will also be supported by the recent comments provided by Christine Lagarde. Importantly, before you start buying the asset, make sure that the MACD indicator is above the zero level and is starting to rise from it.
Scenario 2: it is also possible to buy the euro, when the price hits 1.0900. At that moment, the MACD indicator should be in the oversold area, thus limiting the downward potential and causing the price reversal. The pair may increase to 1.0936 and 1.1001.
Signals to sell EUR/USD
Scenario 1: traders may sell the euro once it touches 1.0900 (a red line) with the target at 1.0894, where it is better to close sell orders and open buy positions, expecting a change of 20-25 pips. Weak data from the eurozone is likely to support demand for the greenback. The Fed's meeting that is scheduled for this week is also adding to the greenback's popularity. Importantly, before opening sell orders, make sure that the MACD indicator is below the zero level and is starting to decline from it.
Scenario 2: it is also possible to sell the euro, if it hits 1.0936. At that moment, the MACD indicator should be in the overbought area, thus capping the upward potential and causing the price reversal. The currency may decline to 1.0900 and 1.0849.
What we see on the trading charts:
A thin green line is the entry price at which you can buy a trading instrument.
A thick green line is the estimated price where you can place a take-profit order or lock in profits by yourself, since the price will hardly go above this level.
A thin red line is the entry price at which you can sell the trading instrument.
A thick red line is the estimated price where you can place a take-profit order or lock in profits by yourself, since the price is unlikely to decline further.
The MACD indicator. When entering the market, it is important to take into account overbought and oversold zones.
Beginning traders should be very cautious when making decisions to enter the market. It is better to open positions ahead of the publication of important reports in order to avoid price fluctuations. If you decide to enter the market amid the news release, place stop orders to minimize losses. Otherwise, you may lose all your funds, especially if you do not use money management and trade big volumes.
Please remember that successful trading requires an accurate trading plan similar to the one described above. Knee-jerk decisions made amid the current market situation is a losing strategy of an intraday trader.
