Hourly chart of the EUR/USD pair
The EUR/USD pair began a new round of downward movement on Monday, which made it possible to settle below the rising channel. Thus, the upward trend is canceled, and a new downward trend is formed instead. Based on this, you are advised to trade for a fall in the near future, but the 1.2059 level is very close to the price, from which the price has already rebounded twice. The third may also bounce. If that happens, the succeeding downward movement will be called into question. In yesterday's evening review, we advised you to open long positions if a new buy signal from the MACD indicator is generated. However, the MACD indicator did not turn to the upside during the day, therefore, there was no need to open longs. But beginners could well trade for a fall. Unfortunately, the sell signal was not the strongest, since at the close of the candlestick, where the price left the rising channel, the price had already gone down 40 points. With an average daily volatility of the EUR/USD pair of 60-70 points, novice traders could expect the pair to fall by another 20-30 points. However, despite the weakness of the signal, those traders who opened sell positions are now in profit by around 20 points.
The fundamental background was rather weak on Monday. Reports on business activity in manufacturing were published in the European Union and the United States, and the unemployment rate was also released in the EU. But one could immediately tell that these reports did not disappoint neither the buyers of the euro, nor the buyers of the dollar. Thus, we believe that today's rise in the US dollar (= fall in the euro/dollar pair) has purely technical reasons. And the PMIs themselves are not the strongest reports, and the unemployment rate has not changed from the previous month.
The eurozone GDP in the fourth quarter will be released on Tuesday. According to forecasts, GDP should decrease by 1-2%. Of course, the fall in GDP is due to the winter lockdown in the European Union. But the reasons are not important to us. The potential reaction of the markets is important. We believe that if this indicator declines by less than 1%, it could cause the dollar to rise. Otherwise, the chances of overcoming the 1.2059 level will increase.
Possible scenarios on February 2:
1) Long positions have lost their relevance at the moment, since the price left the second rising channel. So now you can only consider long positions on the pair if the current downward trend is canceled or a new upward trend (trend line or channel) is formed. At least this development is not expected until Tuesday morning.
2) Trading for a fall has become relevant at the moment. However, the price is supported by the 1.2059 level from below, through which it will be very difficult to pass. If the price settles below it, it will increase the chances of growth for the US dollar. But we recommend waiting for the price to pullback to the upside, the end of the correction, a sell signal to form from the MACD indicator, which must be discharged to the zero level. And only after that, should you consider the possibility of opening new short positions.
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.