Hourly chart of the EUR/USD pair
The EUR/USD pair started to sharply decline last night, which reached a total of over 150 points. It happened around the time that polling stations were closed in America. There were no compelling reasons for such a solid strengthening of the US dollar, although we will talk about the fundamental background a little below. The most important thing now is that the technical picture is completely destroyed. After such a sharp drop, one cannot say that the downward trend has resumed now (although the previous local low was updated), but at the same time, one cannot also say that the upward trend is gaining momentum. Now we need the markets to calm down, afterwards we need to re-evaluate the technical picture and draw conclusions. No trend lines or channel can be drawn. Other signals are also very difficult to receive. The MACD indicator does not normally react to all price reversals - they are too sharp.
At night, the first results of the counting of votes in the United States began to arrive and, according to these data, Joe Biden is in the lead by a large margin. Thus, we can conclude that traders reacted precisely to this factor. However, take note that these are only interim voting results. The final results will become known later and, of course, may differ from the current ones in any direction. You should also remember that the European trading session will open in the coming hours. Simply put, it is still night in the US, the exchanges are closed, so trading among the major players is not carried out. Therefore, with the opening of Europe, and in the afternoon and America, the market may experience new shocks, strong and sharp reversals, as well as new jerks up or down by 100-200 points. Novice traders should be prepared for this. As for macroeconomic statistics, indexes of business activity in the service sectors of the United States and the European Union will be published today, and they are not that important. No reactions towards such data - the markets are now absorbed by completely different news - however, they will make it clear to us how much the service sector in the EU has decreased due to the second wave of COVID-2019 and the repeated lockdown. Also, a rather important ADP report on changes in the level of employment in the private sector will be published in the United States, however, we believe that today any other news and reports, in addition to those related to elections and vote counting, will be ignored by the markets. Thus, everyone will focus on the counting of votes.
Possible scenarios for November 4:
1) Buy positions on the EUR/USD pair became relevant after the price settled above the descending channel. However, after rising, which novice traders could work out, thanks to our recommendations, the quotes began to collapse and now it is extremely difficult to understand when and where it will end. In general, it will be extremely difficult to receive buy signals today, and the fundamental background may continue to have a strong impact on the mood of the markets.
2) Trading for a fall at this time has ceased to be relevant, despite the fact that the pair fell by 150 points in the evening. The pair could rise when the European session opens, or it could fall. Today can be extremely volatile. We advise novice traders to wait until the markets calm down.
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