Hourly chart of the EUR/USD pair
Yesterday was very difficult in terms of trading. The European Central Bank meeting is an extremely important event for the currency market. Volatility increases and sharp changes in the direction of movement are possible when results are announced, summary of the press conference are released or even following the speech of ECB President Christine Lagarde. In principle, this is exactly what happened yesterday. The results of the July meeting were extremely uninteresting. The key rate (the interest rate at which commercial banks and other financial organizations are credited) remained at its minimum value of 0%. It can't be lower, because a negative loan rate will mean that the ECB will pay interest on loans itself, which violates the lending mechanism. The Deposit Rate remained unchanged, also at the ultra-low level of -0.5%. This rate means that the ECB charges depositors for placing deposits on their accounts. This is done in order to motivate investors to invest their money in the economy as much as possible, and not to keep it on deposits.In general, this monetary policy of the ECB is dovish (very soft, aimed at stimulating the economy). However, in addition to the results of the meeting itself, Lagarde gave a speech yesterday, showing some optimism, saying that the economic activity of the population is growing, and that the EU economy is expected to recover in the third and fourth quarters. The euro began to grow due to these comments, without paying attention to the technical picture. However, a few hours later, the pair began to fall again, as the markets lost optimism.
Technical analysis for the second time in two days says that the euro is getting ready to start falling. First, the price fixed below the rising channel, then sharply rebounded, then again pinned below the already updated downward channel. At the moment, we again have a signal for sales, which we advise you to work with. The following scenarios are possible on July 1:
1) We do not advise you to consider buying the euro since the price has consolidated below the rising channel and it is extremely difficult to get a buy signal in such conditions. Even if the price returns to the rising channel, it will no longer be relevant.
2) Since the pair consolidated below the rising channel at the end of the hour and spent the next three hours (three hourly candles) below it, we recommend selling and placing Take Profit orders near the targets - levels 1.1325, 1.1301, 1.1256 . The first one is the safest target. The pair usually travels the same distance (volatility) within the day. At this time, from the lowest to the highest price of each day, the pair passes approximately 75-80 points. There are approximately 60 to the first goal, therefore, when it is achieved, we recommend taking profits and exit the transaction. We recommend setting the Stop Loss level (limits possible losses on the transaction) above 1.1411.
Important speeches and reports (always contained in the news calendar) can greatly affect the movement of a currency pair. Therefore, during their exit, you are advised to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners who trade in the forex market should remember that each transaction cannot be profitable. Developing a clear strategy and money management is the key to success in trading for a long period of time.