Hourly chart of the EUR/USD pair
The EUR/USD pair consolidated below the rising channel yesterday, which already gave hope to traders that the euro would fall. However, there were several important macroeconomic reports in the European Union and the United States released during the day, which contributed to the change in the intraday mood of traders. As a result, everything returned to the scenario that we observe every day - the fall of the US currency. The MACD indicator gave a signal to buy (circled in red) and all sales had to be closed based on this signal. And after the pair returned to the ascending channel, it was already possible to open new long positions (Long, buy).
The most significant highlight of the day was the release of America's second-quarter GDP. GDP - Gross Domestic Product - is the most important indicator of the state of the economy, since it reflects the change in the sum of the values of all goods and services produced in the country for a certain period. Yesterday's GDP report showed that in the second quarter, compared to the first, goods and services were produced by 32.9% less. This is a huge reduction that no one has seen, at least since the 1940s, when such calculations began to be carried out at all. Thus, in general, it is not at all surprising that the euro has resumed to grow. The European Union issued several important reports in the morning, which were also rather weak. For example, in Germany, GDP in the second quarter decreased by 10.1% compared to the first, and the consumer price index (inflation) to -0.1% y/y and to -0.5% m/m. Deflation was already observed in Germany in July (falling prices). From an economic point of view, deflation does not contribute to GDP growth, therefore the central bank and the government of any country try to avoid such a process. However, in times of crisis, deflation or hyperinflation is normal. And the reports from Germany themselves are important because the German economy is considered the locomotive of the entire European Union, the most important part of it.
The following scenarios are possible on July 31:
1) Buying the euro is still relevant, as the euro/dollar pair returned to the upward channel. Thus, today we recommend buying the pair if it remains inside the ascending channel with the targets of resistance levels for July 31 - 1.2927 and 1.2004. It is advised to exit purchases upon reaching any target level or upon a downward reversal of the MACD indicator, which will indicate the beginning of a fall in quotes. A correction is possible on Friday.
2) We advise you to start selling the currency pair again after consolidating below the ascending channel, although in general, selling now contradicts the direction of the main trend, that is, they are dangerous in terms of risks. However, if the price breaks the ascending channel again, then you can sell with targets at the support levels of 1.1768 and 1.1691. The second target is quite distant, so you can take profit at the level of 1.1768.
What's on the chart:
Support and Resistance Price Levels - Levels that are targets when buying or selling. You can place Take Profit levels near them.
Red lines - channels or trend lines that display the current trend and show which direction it is preferable to trade now.
Arrows up/down - indicate when you reach or overcome which obstacles you should trade up or down.
MACD indicator is a histogram and a signal line, the crossing of which is a signal to enter the market. It is recommended to use in combination with trend lines (channels, trend lines).
Important speeches and reports (always contained in the news calendar) can greatly influence 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.