Hourly chart of the EUR/USD pair
The EUR/USD pair, as expected, started an upward correction on Monday night, which we warned about in yesterday's evening article. The MACD indicator turned to the upside and this signal could even be used to open longs for the euro, since the price had previously dropped to the lower area of the 1.17-1.19 horizontal channel, in which it is more convenient to consider buying options. In addition, the MACD indicator did not unload, as we feared last night, and began to rise in parallel with the price. Therefore, those traders who opened longs can now keep them open, since there is a high possibility of succeeding growth. In general, the technical picture remains unchanged, not only in recent days, but in recent weeks. Traders have the same 1.17-1.19 horizontal channel to their disposal, within which the euro/dollar pair mainly moves. If traders manage to get the pair out of this channel, then they can count on a new trend to appear. However, so far we do not see any prerequisites for completing the flat.
The fundamentals for the second trading day of the week will likely be fairly mediocre. Today, Federal Chairman Jerome Powell is set to address the US Congress. According to the practice of previous years, we can say that such speeches before the highest bodies of American power rarely carry unexpected information. Moreover, just last week, the results of the Fed meeting were summed up, and Powell had the opportunity to tell the markets everything that is necessary, exclusively on the topic of monetary policy. Therefore, it is unlikely for the Fed chair to say something fundamentally new both today and tomorrow (we can expect another speech from Powell in Congress on Wednesday, but before another committee). Moreover, Powell's rhetoric is likely to be replete with words about the coronavirus and its impact on the American economy. In general, the conclusion is simple: the weaker and dovish Powell's speech is, the more chances that the US dollar will begin to fall (growth of the euro/dollar pair). Moreover, the current technical picture precisely implies this scenario . Not a single macroeconomic report is planned for today either in the United States or in the European Union. We mean important reports. It is unlikely that any of the traders will be seriously interested in a report on consumer confidence in the EU or on sales in the secondary home market in the United States.
Possible scenarios for September 22:
1) Novice traders are recommended to consider buying at this time, since you can expect the pair to move to the upper area from the lower one of the 1.17-1.19 horizontal channel. Especially since the pair lost around 150 points. The upward pullback has already begun and the pair has already passed 40 points from yesterday's lows. We believe that it may continue to move up, and traders who opened long positions yesterday may remain in them with targets at the resistance levels of 1.1791 and 1.1851. At least until the MACD indicator turns down.
2) It does not seem appropriate to consider shorts at this time, since the pair has already gone down 150 points. Therefore, novice traders are recommended to wait until the pair returns to the area of the upper line of the horizontal channel and afterwards, you can consider selling there, or you can also wait for the appearance of a trend channel or trend line inside the horizontal channel, which would determine at least a short-term trend for the pair. In this case, it would still be possible to trade down in the presence of a downward trend line, for example.
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 (10,20,3) 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 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.
The material has been provided by InstaForex Company - www.instaforex.com