Hourly chart of the EUR/USD pair
The EUR/USD pair continued its downward movement on Friday, not paying much attention to technical factors. The collapse of the euro's quotes at the end of last week is more of a growth of the dollar. In our fundamental articles, we have already analyzed this point. Most likely, the dollar's appreciation was triggered on Thursday by strong US macroeconomic reports, and on Friday - by an increase in anti-risk sentiment in the market associated with an attack by American troops in Syria. Novice traders should understand this point. If geopolitical tensions arise in the world (for example, they regularly arise in the Middle East), this provokes a decrease in investors' appetite for risk. Simply put, traders tend to move their assets from risky to non-risky. Nobody knows what the next military conflict in the Middle East may turn out to be. New terrorist attacks, the threat of a full-scale war, losses on both sides. And despite the fact that the United States is involved in this conflict, the demand for the dollar, as the safest currency, is growing. Of course, no one can say for sure that the rise in the dollar was provoked by this very thing. However, we can only analyze information that is publicly available. And on the last two trading days of the past week, the factors could only be like that. Therefore, beginners could not work on Friday. We recommended looking for an opportunity to buy the pair, but no signals for such were generated. There was no rebound from either the first trend line or the second. There was an upward reversal of the MACD indicator, however, it happened at a time when the MACD indicator went very low and was preparing for uncorrelation with the price (the phenomenon when the price moves in one direction, and the indicator reverses in the other; it happens on strong movements without corrections).
No important macroeconomic or fundamental event in the European Union last Friday, and several secondary reports were published in the United States. It is unlikely that such a firm strengthening of the dollar was associated with reports on changes in income levels or spending by Americans. Or the University of Michigan Consumer Sentiment Index.
The US and the European Union will publish indexes of business activity in the manufacturing sectors, which do not cause any concern at this time. Traders did not react. Thus, the pair will most likely begin to roll back up on Monday.
Possible scenarios on March 1:
1) Long positions have lost their relevance at the moment, but the situation is confusing and ambiguous. The pair is likely to rise on Monday, but both trend lines have been crossed. There is no new downward trend line. Thus, in such a situation, we advise you to wait for the markets to calm down and return to the usual trading mode.
2) Trading for a fall has become relevant, as both upward trend lines have been overcome. At the same time, the pair has already gone down about 180 points, which now requires an upward rollback. Thus, after an upward correction, you can track new sell signals from the MACD indicator. Maybe by then a downward trend line or channel will have formed.
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 in the Forex market should remember that every trade cannot be profitable. Developing a clear strategy and money management are the keys to success in trading over a long period of time.
The material has been provided by InstaForex Company - www.instaforex.com