Trade analysis and trading tips for the European currency
The test of the 1.1241 price level occurred when the MACD indicator had just started moving upward from the zero line, confirming a valid entry point for buying the euro. As a result, the pair rose by almost 20 points.
The euro continued to strengthen against the dollar, even though European economic data did not support this move, as the eurozone's own figures were weak. The final composite PMI for October came in at 51.7, compared with the forecast of 51.9 and September's reading of 53.1, falling to a four-month low. The services PMI declined to 51.4, against expectations of 51.7.
The details of the report were also concerning. New orders almost stopped growing, employment declined for the first time since May, and business expectations fell to their lowest level since May. At the same time, inflation accelerated. The Consumer Price Index rose to 4.0% in October from 3.8%, in line with expectations. This means that economic growth is losing momentum while prices are rising faster. This is an unfavorable combination for the euro, as the ECB must balance its efforts to combat rising prices against the risk of weakening already fragile economic activity.
Following the weak European economic data, the euro managed to remain in positive territory only because of the dollar's decline. Now, attention turns to US economic releases. In the second half of the day, the ISM Services PMI, the US Composite PMI, and the trade balance will be published. Forecasts suggest that the ISM index will remain at 54.9, unchanged from September, while the composite index will come in at 57.6, compared with 58.4 a month earlier. The trade deficit for September is expected to widen to $107.9 billion from $105.6 billion in August.
In contrast to the eurozone, where the composite PMI declined, the US services sector appears considerably stronger, even after accounting for the expected slight decrease. If the figures confirm this strength, the dollar could recover some of its losses, leaving the euro without support. Otherwise, weakness in the US currency is likely to persist. The price component of the ISM report is also worth monitoring, as it remained at its highest level since 2022 in September. A further increase could strengthen expectations regarding the Federal Reserve's monetary policy.
As for the intraday strategy, I will focus primarily on implementing Scenarios #1 and #2.
Buy Signal
Scenario #1: Today, I plan to buy the euro when the price reaches around 1.1264 (the green line on the chart), targeting a rise to 1.1314. At 1.1314, I plan to close the position and then open a short position on the euro, targeting a move of 30–35 points from the entry point. The euro could rise today if US economic data comes in weaker than expected.
Important! Before buying, make sure that the MACD indicator is above the zero line and has just started moving upward from it.
Scenario #2: I also plan to buy the euro today if the price tests the 1.1237 level twice consecutively while the MACD indicator is in the oversold area. This would limit the pair's downward potential and trigger an upward market reversal. The pair could then rise toward the opposite levels of 1.1264 and 1.1314.
Sell Signal
Scenario #1: I plan to sell the euro after the price reaches 1.1237 (the red line on the chart). The target will be 1.1191, where I plan to close the short position and immediately open a long position, targeting a reverse move of 20–25 points from that level. Selling pressure on the pair could return if US economic data comes in stronger than expected.
Important! Before selling, make sure that the MACD indicator is below the zero line and has just started moving downward from it.
Scenario #2: I also plan to sell the euro today if the price tests the 1.1264 level twice consecutively while the MACD indicator is in the overbought area. This would limit the pair's upward potential and trigger a downward market reversal. The pair could then decline toward the opposite levels of 1.1237 and 1.1191.
What the Chart Shows
- Thin green line – the entry price at which the trading instrument can be bought.
- Thick green line – the projected price level at which Take Profit can be set or profits can be closed manually, as further gains above this level are considered unlikely.
- Thin red line – the entry price at which the trading instrument can be sold.
- Thick red line – the projected price level at which Take Profit can be set or profits can be closed manually, as further declines below this level are considered unlikely.
- MACD indicator – when entering the market, it is important to consider the overbought and oversold zones.
Important: Beginner Forex traders should be extremely cautious when making market entry decisions. It is best to stay out of the market ahead of major fundamental economic releases to avoid exposure to sharp exchange rate fluctuations. If you decide to trade during news releases, always use stop-loss orders to minimize potential losses. Without stop-loss orders, you can lose your entire trading deposit very quickly, especially if you do not use proper money management and trade with large position sizes.
Remember that successful trading requires a clear trading plan, such as the one presented above. Making spontaneous trading decisions based on current market conditions is a losing strategy for an intraday trader from the outset.