Overview of trading on Monday
30M chart of EUR/USD
On Monday, EUR/USD was trading with a minor upward move. Looking at a 30-minute chart, we see clearly that the currency pair slumped on Friday and crept upwards on Monday. Thus, the essence of today's move is the pair's upward correction following a sharp drop on Friday. Curiously, EUR/USD fell steeply on Friday without any obvious reasons like events or economic data. Nevertheless, this is what happened and the price developed a downward channel that is of little help in trading. The chart shows that the angle of its decline is minor, so it cannot be called a trend channel. The conclusion is simple. Beginners should grasp the point that at present, EUR/USD is trading with a slightly bearish bias. It is so subtle that is very similar to a trading range. Hence, we would not recommend using MACD to search for any trading signals.
5M chart of EUR/USD.
A 5-minute chart also reveals a boring picture. In the early European session, we could spot something like trading signals, but it is clearly seen that they cannot be treated as accurate and evident. The price was hovering at around 1.2104 for nearly one and half hours. What I mean is that beginners should not work out such uncertain signals. Indeed, it was hard to figure out what signal came into being and when. Later, the pair went 30 pips upwards during the day. This move was not enough to trigger a take profit order. Perhaps beginners could have been wrong when analyzing available signals. Things happen. Let me remind you that trading signals have to be as accurate as possible and clear-cut so that it should make sense to work them out. Today the economic calendar lacks any macroeconomic reports.
EUR/USD is still trading not far away from its 3-year highs. It has been trading in a weak downward channel for almost 3 weeks. This manner of trading looks like a trading range. This situation is confusing as the price could follow any scenario could in the near time.
How to trade EUR/USD on Tuesday
According to a 30-minute chart, EUR/USD is moving inside a weak downward channel. In fact, it is hard to sniff out any trend. Importantly, beginners are still not recommended to search for any signals from MACD indicator in a 30-minute chart. It would be better to wait until the pair enters a trendy market and start trading consciously rather than trading at random.
Following a 5-minute chart, beginners are recommended to trade EUR/USD from 1.2092, 1.2104, 1.2143, and 1.2159. As earlier, we place a take profit 30-40 pips away. A stop loss is set at a break-even level when the price moves in the right direction 15-20 pips. In a 5-minute chart, the target could be the nearest level unless it is too clear or too distant. Anyway, the target could be determined according to the market conditions. On Tuesday, the economic calendar for the EU is also empty. Tomorrow, the US is due to release the only report worthy of attention: retail sales for May. The consensus suggests 0.5% contraction on month. If the actual reading is stronger than expected, then we could see some advance of the US dollar. If the retail sales are worse than the consensus, the US dollar will weaken in response. All in all, we do not expect an avid response to this report.
What's on the chart:
Support and Resistance levels are the levels that are targets when opening buy or sell orders. Take Profit levels can be placed near them.
Red lines are channels or trend lines that display the current trend and show which direction it is preferable to trade now.
Up / down arrows show whether the pair should be traded up or down when reaching or overcoming particular obstacles.
MACD indicator (14,22,3) is represented by a histogram and a signal line. When they are crossed, this signals a market entry. It is recommended for use in combination with trend patterns (channels, trend lines).
Important speeches and reports in the economic calendar can greatly influence the movement of the currency pair. Therefore, during their release, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
The material has been provided by InstaForex Company - www.instaforex.com