Trade Analysis and Tips for the Euro Currency
The test at 1.1371 coincided with the moment when the MACD indicator moved significantly upward from the zero mark, limiting the pair’s bullish potential. For this reason, I did not buy the euro.
Weak data on consumer sentiment set the tone for trading yesterday and deprived the dollar of support. The consumer confidence index, instead of rising to the expected 92.4 points, fell to 90.8, reflecting a deterioration in the assessment of the economic situation. This indicator is important because the market uses it to judge the willingness of the population to spend, and thus the prospects for economic growth. Therefore, its decline weakened expectations for a prompt tightening of Federal Reserve policy. The single currency capitalized on this dollar weakness. As the disappointing data undermined demand for the US dollar, the EUR/USD pair began to recover. Additional effects came from other secondary data that also came out weaker than forecasts.
Today, the euro enters the first half of the day with a rather sparse agenda, with the only item being the German import price index. Import prices indicate how much the goods entering the country are becoming more expensive and are considered a leading indicator of inflation since their rise gradually reflects on the end product’s price. With weak data, the continuation of the upward movement for the euro looks unlikely, as the EUR/USD pair clearly lacks internal support to confidently develop its recent bullish momentum ahead of the Fed meeting.
Regarding the intraday strategy, I will primarily rely on implementing scenarios #1 and #2.
Buying Scenarios
Scenario #1: Today, I plan to buy euros upon reaching a price around 1.1404 (green line on the chart), with a target for growth to 1.1422. At the point of 1.1422, I plan to exit the market and immediately sell euros in the opposite direction, expecting a movement of 30-35 pips from the entry point. It’s reasonable to anticipate growth for the euro only after strong data. Important! Before buying, ensure that the MACD indicator is above the zero mark and is just starting to rise from there.
Scenario #2: I also plan to buy euros today in the case of two consecutive tests of the price 1.1388 when the MACD indicator is in the oversold area. This will limit the pair’s downward potential and lead to an upward market reversal. A rise to the opposite levels of 1.1404 and 1.1422 can be expected.
Selling Scenarios
Scenario #1: I plan to sell euros today after reaching the level of 1.1388 (red line on the chart). The target will be the level of 1.1360, where I intend to exit from the short positions and immediately buy in the opposite direction (expecting a movement of 20-25 pips in the opposite direction from the level). Pressure on the pair will return today in the case of poor data. Important! Before selling, ensure that the MACD indicator is below the zero mark and is just starting to decline from there.
Scenario #2: I also plan to sell euros today in the case of two consecutive tests of the price 1.1404 when the MACD indicator is in the overbought area. This will limit the pair’s upside potential and lead to a market reversal downwards. A decline to the opposite levels of 1.1388 and 1.1360 can be expected.
What’s on the Chart:
- Thin green line – entry price for buying the trading instrument;
- Thick green line – estimated price for placing Take Profit or manually securing profits, as further growth above this level is unlikely;
- Thin red line – entry price for selling the trading instrument;
- Thick red line – estimated price for placing Take Profit or manually securing profits, as further decline below this level is unlikely;
- MACD Indicator. When entering the market, it is important to be guided by the zones of overbought and oversold.
Important: New traders in the Forex market should make decisions about market entry very cautiously. Before the release of important fundamental reports, it is best to stay out of the market to avoid sharp fluctuations in the exchange rate. If you decide to trade during news releases, always set stop orders to minimize losses. Without setting stop orders, you can quickly lose your entire deposit, especially if you do not use money management and trade with large volumes.
And remember, for successful trading, it is essential to have a clear trading plan, like the one outlined above. Spontaneous trading decisions based on the current market situation are inherently a losing strategy for intraday traders.
