Hourly chart of the EUR/USD pair
The EUR/USD pair continued to correct last Thursday night. As we promised in the previous article, after we devoted some time to analyze the technical picture, a new downward channel appeared, which simply overlaps the previous sideways channel. As we have already mentioned in recent days, the EUR/USD pair continues to trade rather indistinctly, so at this time it is very difficult to draw an unambiguous conclusion about which trend the price is in. Therefore, at the moment we propose to focus on the new downward channel (unless, of course, the price leaves this area in the next few hours). Be that as it may, but a rebound from the upper border of this channel can provoke the price to move down towards the area around 1.1740. If the price overcomes the channel, then it can continue to go up to the upper border of the 1.17-1.19 side channel, which is where the pair has been trading in for a month and a half. This approximate situation can be obtained on Thursday morning.
Novice traders will have something to pay attention to on September 10. The European Central Bank's decision on monetary policy will be released today. We already addressed what decisions it can make in last night's evening article. For now, let's just briefly recall that rates are unlikely to be raised or lowered, so the most interesting thing is whether the ECB will expand one of the quantitative stimulus programs. Simply put, will the ECB decide to inject even more money into the EU economy by buying out securities? If so, the euro could fall today, wherever it is in the relatively new downward channel. Also, if the accompanying ECB statement contains hints of a weak economy or a willingness to expand QE and PEPP programs during 2020, it will also be a bearish factor for traders. We can expect the ECB President Christine Lagarde to deliver a speech in the evening, who, in turn, will also talk about economics and monetary policy. And the more dovish her rhetoric is, the bigger chances for the euro to fall. The most inconvenient thing for novice traders today is the combination of technical analysis and fundamental analysis. For example, it is possible for quotes to go above the downward channel, thus showing a willingness to continue moving up, but in case Lagarde's rhetoric or the ECB's decisions turn out to be extremely weak, then this will make the pair fall. There are no important publications or events scheduled in the United States for today.
Possible scenarios for September 10:
1) Novice traders are still not recommended to consider buy positions at this time. However, if the price settles above the downward channel, then the trend will change to one that is upward and it will be possible to open long positions with targets at 1.1877 and 1.1903. We remind you that there might be sharp price reversals during the publication of the ECB decisions and Christine Lagarde's speech, so it is recommended to trade with increased caution.
2) Sell positions still look more attractive now, only because a new downward channel has emerged. Thus, a rebound in quotes from its upper line or a downward reversal of the MACD indicator will be signals to open short positions with targets at 1.1759 and 1.1740.
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 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