Hourly chart of the EUR/USD pair
The EUR/USD pair continues to amaze with its movements. Yesterday we said that a fall could begin from the area of 1.1570, where the upper line of the narrowing channel passes. However, the price did not even stop near this line and, in fact, deprived traders of the signal. Such a strong upward trend must be justified in terms of news or fundamental events. There may be several hypotheses, but each does not bring us closer to answering the question, what to expect from the pair in the future? For example, what are the chances of continuing the upward movement after it has already gone up at least 800 points, if we take the last low as a starting point? All this time, the pair has corrected by only 250 points, and in recent days it has been growing with terrible force. Compare, as always necessary, the economies of the European Union (the issuer of the euro) and the United States (the issuer of the dollar). The situation in the European Union is calm. There are almost no economic news and reports. At the beginning of the week, leaders have decided to form a 750 billion euro recovery fund at the EU summit, which is certainly good news. But now everything is bad in America. The country is in the same economic crisis as the EU. However, the prospects for the US economy are now much more vague, and the timing of its recovery raises many questions. The fact is that the coronavirus epidemic continues to rage in the United States. We would like to write "which the authorities cannot stop," but the White House is not particularly keen on stopping it. US President Donald Trump compares COVID-2019 with a runny nose, and the very next day he urges everyone to wear masks and "expects the situation to worsen." But at the same time, a new quarantine is not introduced in the United States. This significantly reduces the demand for the US dollar in the foreign exchange market.
Nevertheless, technical analysis gives traders the opportunity to make new sales, although it is somewhat dangerous. There was no clear and distinct rebound from the rising channel line. Thus, we cannot make an unambiguous conclusion about the pair's readiness to fall. An update of the local high (1.1601) can provoke a new upward movement. The following scenarios are possible on July 23:
1) Buying the euro is still relevant, but we believe that opening them near the upper channel line is risky, especially after a long upward trend. We recommend traders to re-consider buying the euro if the upper channel line is broken once more and the 1.1601 high is updated. You are advised to set the target based on volatility, that is, at a distance of 50-60 points.
2) You can try to sell the currency pair with a distant target of 1.1371. This goal is quite achievable and means a possible fall to the lower channel line. The Stop Loss level can be set above the level of 1.1601 to protect yourself from possible losses if the upward trend continues. Intermediate Take Profit can be placed every 50-60 points.
Important speeches and reports (always contained in the news calendar) can greatly affect the movement of a currency pair. Therefore, during their exit, 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.
Beginners in the forex market should remember that every trade cannot be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.