Hourly chart of the EUR/USD pair
The EUR/USD pair unexpectedly began to exclusively move sideways with minimal volatility on Tuesday, January 12. A more or less tangible upward movement began and reached the upper line of the descending channel by the end of the trading day. This is the kind of movement that we have been expecting. In the morning review, we advised you to wait for the MACD indicator to discharge and create a new strong sell signal. Such a signal could have formed only due to an upward correction. It did not appear during the day but can do so in the near future, possibly at any moment now. The MACD indicator has already come close to the zero level, and the price has to pass 20-25 points to reach the upper border of the channel. Thus, either a rebound from this line or a downward reversal of the MACD may bring back the downward movement. Of course, another option is not excluded, in which the channel will be overcome. But in this case, novice traders will receive a buy signal.
No major news for the euro or the dollar on Tuesday. In fact, the important news right now only concerns the political crisis in the United States. Donald Trump may face impeachment at the end of his presidential term, which threatens him with big problems in the future and severe restrictions when he becomes a private citizen. Joe Biden's inauguration day also raises concerns. Will something similar happen on January 6? In any case, Trump has already introduced a two-week emergency regime in Washington, and it is not clear whether he is cautious against new attacks by demonstrators or is he insuring himself in case he is again accused of riots?
The US will publish the consumer price index for December on Wednesday, January 13. The dollar may slightly increase if inflation rises over the reporting month. In fact, traders can ignore macroeconomic reports again. European Central Bank President Christine Lagarde will speak at the European Union, but everything will depend on her rhetoric. Lagarde can talk not only about monetary policy, but also about other aspects of the financial system. Forex market participants are most interested in the economy and how the central bank affects it, that is, monetary policy.
Possible scenarios on January 13:
1) Long positions are currently irrelevant, since the downward trend remains in force. Thus, those who wish to buy the euro/dollar pair should wait for a new upward trend to appear or the end of the downward trend (consolidation of quotes above the descending channel). In this case, you can consider long positions with targets around the 1.2264 level.
2) Trading for a fall is more relevant now, since there is a descending channel. Thus, you are advised to open new short positions while aiming for support levels 1.2112 and 1.2074 (to be specified on Wednesday morning), if a new MACD sell signal is generated, which should be discharged to zero before that. Also, a rebound from the upper border of the descending channel can be considered as a sell signal.
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.