EUR/USD hourly chart
On Wednesday, the EUR/USD pair turned to the downside and started a new round of a downtrend. Unfortunately, the price has consolidated above the descending channel that we advised you to use as a buy signal. This buy signal was a weak one, as the MACD indicator was already at its maximum values when the signal was being formed. It is ok if novice traders opened long positions following this signal because in a couple of hours the MACD indicator turned to the downside, thus signaling the end of the uptrend. As a result, beginners were able to close buy orders with zero profit or with a loss of just 1-2 pips. When the MACD indicator was about to reverse, the price had already reached a new high. Therefore, it was possible to rebuild the descending channel and rebound from its upper boundary. However, the signal was mixed, so beginners could refrain from opening short positions during the day. At the moment, the EUR/USD pair is moving downwards, but no new sell signals have been formed yet.
On Wednesday, January 13, the inflation rate data was released in the US. It turned out to be much better than expected. However, at the time of its publication, the EUR/USD pair had already fallen by almost 60 pips. So, the report could not be the only reason to trigger the dollar's growth, although it could have provided some support. The speech of ECB head Christine Lagarde also had no effect on market participants, although her rhetoric was very optimistic. It could be that traders either did not believe Lagarde, or downplayed the importance of her speech. Notably, the European currency began to fall at the time of speaking and extended its losses throughout the day.
On Thursday, January 14, the United States will publish the data on initial jobless claims. It is viewed as a minor report amid current circumstances. Markets will react to this data only if the figures will differ greatly from the projected ones. In the afternoon, Fed's Chair Jerome Powell will give a speech which is a highly anticipated event. Of course, everything will depend on whether Powell will discuss the economic issues and monetary policy. Anyway, this event is worth paying attention to.
Possible scenarios for January 14
1) Long positions are still not relevant at the moment, as the downtrend remains in place. Those who plan to buy EUR/USD should wait for the quotes to consolidate above the descending channel. In this case, it will be possible to consider opening long positions with the targets at the support levels of 1.2232 and 1.2257.
2) Trading short seems a better idea now. However, a new round of a downward movement has already started, so you need to wait for a new sell signal. Thus, we recommend opening new short positions with the targets located at the support levels of 1.2131 and 1.2111 which will be specified in the morning. You can open new short positions only after a new MACD sell signal is generated. Before that, the MACD indicator should reach a zero level. A rebound from the upper boundary of a new descending channel can also be considered 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 trendlines 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, and 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 patterns (channels and trendlines).
Important announcements and economic reports that you can always find on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exit the market in order to avoid sharp price fluctuations.
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.