Hourly chart of the EUR/USD pair
Traders again could not decide in which direction to trade the pair on the first trading day of the week. To begin with, the price crossed the red resistance line, from which it had previously rebounded three times, but the upward movement did not work out. In fact, this is a false signal to buy. Yesterday's news can be interpreted as you like. The first thing that became known is that the EU summit is being extended for one more day, and its participants will continue to try to agree on the distribution of 750 billion euros, which are intended for the countries of the European Union most affected by the coronavirus epidemic. In the evening, information appeared in the media that they seemed to have succeeded, but it is better to wait in order to be sure of what is happening. If the aid package is nevertheless adopted at the summit (that is, it is approved by all 27 EU member states), the euro may continue its upward movement. If there is no positive result, then the euro may start falling. In any case, now traders are advised to exercise caution, as the market swings from side to side, and traders cannot clearly understand which way to move. We remind you that an equally strong factor that can deter traders from buying the US dollar (selling the EUR/USD pair) is the coronavirus epidemic in America, which not only does not subside, but is also growing in scale. The inaction of the White House is upsetting the foreign exchange market, as it seems that for US President Donald Trump, the lives and health of Americans do not matter the most, but the economy in order to be re-elected for a second term in November. And economic reports for today are generally not listed in the news calendar. In general, the situation is rather ambiguous.
Technical analysis still warns that the pair may start falling. The only problem is that in the end, the growth does not continue, and the fall does not begin. The market seems to be in standby mode. Thus, novice traders will also need to wait a bit for more favorable conditions. At the same time, we should clearly analyze how the market will react to the results of the EU summit. The following scenarios are possible on July 21:
1) Purchasing the euro is possible, but this will definitely require news that the EU economic recovery fund after the pandemic is approved. If such information is received in the media, then we can expect the euro to grow again. But to do this again, you will have to overcome the red resistance line, at least. In this case, the trade will open – we recommend setting Take Profit according to the volatility, that is, 50-60 points higher than the opening of the transaction.
2) As the pair continues to trade below the 1.1442 level, sales are still more preferable now with targets of 1.1371 and 1.1325. We have a new sales signal in the form of a rebound from 1.1442. The probability of the euro's fall will increase if positive results are not achieved at the summit.
Important speeches and reports (always contained in the news calendar) can greatly affect the movement of a currency pair. Therefore, during their exit, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners in the forex market should remember that every trade cannot 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 material has been provided by InstaForex Company - www.instaforex.com