Hourly chart of the EUR/USD pair
The EUR/USD pair continued its upward movement on Tuesday, which had begun the day before. And at the end of the day, it managed to overcome the upper border of the descending channel. Thus, the downward trend was canceled, and the upward trend was formed. Consequently, you should consider bull trading again. Novice traders had reason to open buy orders today when the quotes settled above the channel. However, as we warned in the previous articles, after the pair rose by around 50 points, it could not show a strong upward movement. Thus, it went up another 30 points and the movement began to dry out. The MACD indicator may turn to the downside at the current candlestick, which will mean a signal to close long positions. After that, it will be necessary to wait for the indicator to discharge to the zero level and create a new buy signal. But with sales, novice traders will now have to wait. Perhaps even a few days. Sell orders currently require the current upward trend to be undoubtedly reversed.
No important report from Europe and America on Tuesday, January 19. The euro rose, but we can not conclude that this growth was based on any fundamental events. Everyone is ready for a change of president in America. Joe Biden's Inauguration Day will be held on Wednesday. We were worried that the markets might get nervous about this, but nothing like that! Trading takes place in an extremely calm atmosphere. As we mentioned above, there is no reason to assume that the fundamental background has influence on the pair's movement. Therefore, you should continue to trade exclusively on technical signals.
On Wednesday, January 20, besides the report on inflation in the European Union for December and the inauguration of Joe Biden, there is nothing to pay attention to. The consumer price index is expected to remain unchanged. And the inauguration is a very formal process. If Donald Trump does not urge his supporters to "go to the Capitol" (which certainly does not make any sense), then the whole procedure will be quiet and calm. We do not know what will happen next. So far, the US dollar has lost 5 cents since Biden was proclaimed as the US president. It can be concluded that the dollar no longer likes Joe Biden. If so, then we can expect a long-term decline in the dollar. But this does not mean that the dollar will fall in price for the next four years.
Possible scenarios on January 20:
1) Long positions became convenient since the price settled above the descending channel. However, all resistance levels have already been overcome today, and the MACD indicator is about to turn down. Thus, we recommend waiting for a downward correction, after which a new buy signal is formed. This will not happen until Wednesday morning, and maybe later. Therefore, we will take tomorrow's targets.
2) Trading for a fall has been canceled. Now, to resume trading down, the price needs to make it clear that the downward trend has resumed. To do this, an ascending channel or trend line must be formed, and therefore canceled. Or, the price should fall below the current local low of 1.2055. Nothing of the kind is expected until tomorrow morning at least.
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 trend lines 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 (14,22,3) 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 lines (channels and trend lines).
Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.