EUR/USD hourly chart
On Wednesday, September 23, EUR/USD pulled back from the support level of 1.1675, rising by 40 pips, and then returned to the same support. That was how the session closed on Wednesday. It is still rather difficult to trade from the current levels. The descending channel was formed just a few hours ago. Given that the channel is quite narrow, the price may easily settle above it. So, even a slight correction will bring the pair out of this channel. The MACD indicator usually sends sell signals when there is downtrend in place. However, at the moment it does not show any clear direction and cannot reach a zero level. At current levels, where the indicator has been holding over the past few days, the signals are delivered too late. Thus, for novice traders, it is not the best time for trading at the moment. Moreover, there were two unsuccessful attempts to break through the 1.1675 level. This means that he pair might have hit a new low. Therefore, the downtrend is very unlikely until the pair breaks through this level. As mentioned before, any correction will push the pair out of the new descending channel.
Today, the data on services and manufacturing PMI was released in the EU and US. Obviously, the US PMI was not of big interest to traders since it mostly came in line with expectations. However, the data from the EU was rather surprising. For instance, Germany and France's Services PMI unexpectedly dropped below the level of 50.0 which indicates a decline in this sector. Moreover, the Eurozone Services PMI also slid below the mark of 50. Most likely, this is due to the second wave of the coronavirus pandemic in Europe. On the other hand, the indicators could have pulled back from their recovery levels reached after the lockdowns and the first coronavirus wave ended in Europe. One way or another, the drop in business activity is definitely a negative factor for the European currency. Therefore, the euro's fall on Wednesday was quite logical. However, the prospects for the US currency are rather gloomy as well, as the background remains largely negative. In particular, Jerome Powell and Steven Mnuchin said that the Congress needs to approve a new stimulus package to support the American economy. Otherwise, the economic recovery is set to slow down.
On Thursday, September 24, Fed Chairman Jerome Powell will again testify before the Congress, this time before the US Committee on Banking. Steven Mnuchin is also expected to make an announcement in the US Congress. Most likely, the reports will not differ much from the previous ones. Besides, no macroeconomic statistics are planned for tomorrow. So, if Mnuchin and Powell do not surprise the markets with any unexpected statements, the trading will go as usual without any sharp fluctuations.
Possible scenarios for September 24
1) We would not recommend opening any buy deals at this time, since there has been no signal to confirm the trend. However, now we can see a descending channel being formed. If the price settles above this channel, it will confirm the start of the bullish trend, especially if it fails to break through the level of support at 1.1675. For long positions, the nearest targets should be set at 1.1756 and 1.1805. If this scenario comes true, the pair will actually return to the sideways channel of 1.17-1.19.
2) Selling the pair does not look any better at the moment. However, if the price consolidates above the descending channel, the whole technical picture will change. This again creates a controversial situation when the MACD indicator needs to return to the zero level. At the same time, the pair will most likely leave the downward channel, making all sell signals no longer relevant. We recommend that traders wait until the morning session and reassess the situation.
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 (10, 20, 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.