EUR/USD 1H
The EUR/USD pair continued its strong downward movement, which began yesterday afternoon. Novice traders could witness a fairly rare phenomenon - a mass reset of open positions by traders. Simply put, the pair's collapse was caused by the mass closing of long positions. Thus, with a high probability, the upward trend is completed. The price settled below the upward trend line at the beginning of this movement, so the trend changed to a downward trend. We did not expect that the movement would be so strong, but it turned out that the dollar rose by 100 points in less than a day. Now we believe that we need to wait for an upward correction, after which it will be possible to start selling the euro/dollar pair. The MACD indicator has already turned up, although the price is not moving up, this phenomenon is called "indicator discharge".
There are no important events or publications in the European Union scheduled for August 20. And in principle, the EU has recently received an extremely small amount of news, most of which is not taken into account by traders. Therefore, we recommend that novice traders fully focus their attention on America. Now is a difficult time for trade, as the whole world is mired in an economic crisis that has not been seen for several decades, at least. Accordingly, markets often behave illogically. As we said earlier, some reports do not cause any reaction from market participants, although before the crisis, they could be safely traded. Therefore, technical factors and the general fundamental background are now in first place. Technical factors indicate that the euro/dollar pair is ready for a long fall, since instruments from the currency market can not move in one direction for too long, plus the upward trend line has been overcome. The overall fundamental background is clearly not in favor of the dollar, since there are still a very large number of problems in the United States. The coronavirus epidemic, political squabbles, lack of understanding between Democrats and Republicans, who must agree and accept a package of financial assistance for unemployed Americans and small businesses, a serious deterioration in relations with China, and the upcoming presidential election. All this in the background puts pressure on the US currency. But from time to time, the pair should still be adjusted. Therefore, we believe that in the coming week, novice traders can expect to move down by 200-300 points. The main thing is that the flow of negativity from America has stopped for some time at least.
The following scenarios are possible on August 20:
1) You are advised to not consider buying the pair on Thursday. Even if the upward trend resumes from the current positions (which is unlikely), then reasons are needed for new purchases of the euro. Technical factors now speak in favor of the dollar's growth, no macroeconomic reports are planned for today, so only unexpected and extremely important news from the EU or the US can return the market's demand for the euro. But this option is also unlikely for today. Thus, we do not consider buying just yet.
2) But we recommend to start selling the pair after the price corrects upward. The nearest target for short positions is 1.1794. It would be ideal if the pair went up by 50 points, after which the MACD indicator would turn down, and on this signal it would be possible to open sells. However, this is a market and it is so beautiful when everything happens. Therefore, the pair may resume falling today even without an upward correction. You also need to be prepared for this option.
What's 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 preferable 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 (you can always find them in the news calendar) can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginners in the Forex market should remember that not every single trade should 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