Hourly chart of the EUR/USD pair
The EUR/USD pair reached the 1.2309 level last night, which is the peak for the last 2.5 years, and even went a little higher, thus updating the high. Last night's situation was rather complicated and strange. On the one hand, the high has been updated, which means that the upward trend has resumed. Therefore, it is already necessary to consider bullish trading. On the other hand, the price failed to overcome the 1.2309 level and a correction began. On the third hand, a new upward trend line has been created, which supports growth, although just a couple of days ago the quotes settled below the previous upward trend line, thus breaking the upward trend. In general, novice traders can clearly see what a strong trend is. There are no reasons for further strengthening of the euro, technical sell signals are worked out poorly, there are many false signals. In such conditions, we would not recommend opening sell orders, although formally such a signal was generated last night. Therefore, we recommend considering bull trading, but, as before, only if the level 1.2309 is overcome.
In terms of foundation, there is still little to say. At night, of course, there was no important news that could push the dollar to fall. However, traders don't need reasons now. In such conditions, it is difficult to say whether it makes sense to pay attention to macroeconomic reports? But we still advise you to pay attention to today's reports on business activity in the US and EU services sectors, as well as the ADP report on changes in the number of employees in the US private sector. First, the EU business report can show how bad the sector is after the lockdown. Secondly, the ADP report will show how well the labor sector is doing in the midst of the next wave of the coronavirus pandemic. However, this or that report can still provoke a certain reaction (by 30-40 points). This morning it has been noticeable that the EUR/USD pair will strive to renew highs. Thus, the upward movement is likely to continue today.
Possible scenarios on January 6:
1) Long positions have suddenly become relevant, since a new upward trend line was created last night, and the price is about to overcome the 1.2309 level. If this happens, then we advise you to buy the euro again while aiming for the resistance levels of 1.2343 and 1.2381. Volatility is not at its highest now, so the first target looks more realistic.
2) Trading for a fall has lost its relevance, since a new upward trend has been created. Therefore, you are advised to open new short positions with targets at the support levels of 1.2259 and 1.2221 if the pair settles below the new trend line, which can happen today. You should also be prepared for new false signals that can form in pairs and severely filter them out.
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 (14,22,3) 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