Hourly chart of the EUR/USD pair
The EUR/USD pair initially began a new round of downward movement on Friday, and then resumed its upward movement, which made it possible to form a new upward channel. And so we managed to form a new upward trend that does not look strong last Friday, and was formed after... an upward trend. Not the best situation from a technical point of view. Nevertheless, we did not advise novice traders to open long positions last Friday, and a new channel was formed later on. But we did recommend opening short positions at a new sell signal from the MACD indicator. Before this signal was generated, the indicator was discharged above the zero level, so the signal turned out to be strong. But take note that this signal was canceled very quickly. We named 1.2056 as the target level, but the price did not reach it. The MACD indicator subsequently turned to the upside, which served to cancel the buy signal. As a result, beginners could have earned just a few points, because a tangible upward movement began during the European trading session. In total, we now have a new upward trend and therefore, we recommend trading bullish.
The fundamental background was practically absent last Friday, January 29. A few minor macroeconomic reports did not affect the traders' mood in any way. The dollar fell in the morning and continued to do so for most of the day. The euro managed to slightly pull back late in the afternoon. The US reports turned out to be pretty good. Changes in the levels of income and expenditures of the US population, the Chicago PMI were better than predicted values. The consumer confidence index was the only report that turned out to be slightly worse. But in general, these reports would hardly have influenced the pair's movement, whatever their significance.
The European Union is set to publish the unemployment rate and the index of business activity in the manufacturing sector on Monday. Unemployment in the EU has significantly grown lately, but by the end of December it should not grow more than 8.3%. The business activity index in the manufacturing sector does not cause any concerns now, because it is at a fairly high level - 54.7. This service sector is suffering from the pandemic and quarantine, but the manufacturing sector no longer does. Two PMIs will be released in America, both in manufacturing. And both already have very high values and are unlikely to go down much. Therefore, business activity in the United States is also not a cause for concern, and accordingly there will hardly be a reaction to it.
Possible scenarios on February 1:
1) Long positions are relevant again, as a new upward channel has formed. The MACD indicator has already started discharging, so now we need to wait for the end of the correction, and then we should track a new buy signal while aiming for resistance levels 1.2148 and 1.2176. The closer the MACD approaches the zero level, the stronger the signal.
2) Trading for a fall has become irrelevant at the moment. An upward trend has been formed. If the price manages to settle below the rising channel on Monday, this can be used as a signal to sell with targets at support levels 1.2087 and 1.2059. We do not see the pair moving below the 1.2059 level as of the moment.
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.
The material has been provided by InstaForex Company - www.instaforex.com