FX.co ★ Analysis and trading tips for EUR/USD on August 18

Analysis of transactions in the EUR / USD pair

The test of 1.0152 took place at the moment when the MACD went down quite a lot from zero, limiting the downside potential of the pair. Sometime later, the pair tested 1.0185, but the MACD line was still far from zero, so the upside potential was also limited. No other signals appeared for the rest of the day.

Although the rate at which GDP in the Euro area was growing slowed down in the 2nd quarter, the direction of EUR/USD remained the same as the figure did not differ much from the first estimate. On top of that, risk appetite continues to decrease, thanks to the latest data on US retail sales, which did not show any growth in July, and the less aggressive policy approach the Fed indicated in its minutes.

Ahead are important reports from the Euro area, such as the consumer price index, which shows how much inflation has risen. A further increase is, of course, very bad for the economy because things are getting worse every day. This is a bearish signal for EUR/USD. ECB board member Isabelle Schnabel will also speak and shed light on the central bank's future policies.

Weekly initial jobless claims in the US are expected in the afternoon, followed by the Philadelphia Fed manufacturing index and existing home sales. These indicators will most likely be negative, which will harm risky assets. Speeches by FOMC members Esther George and Neel Kashkari will also attract some interest as they will express their position on future monetary policy plans.

For long positions:

Buy euro when the quote reaches 1.0177 (green line on the chart) and take profit at the price of 1.0219. However, there is little chance for a rally today, especially since a bearish market is brewing due to the impending recession.

Take note that when buying, the MACD line should be above zero or is starting to rise from it. Euro can also be bought at 1.0149, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0177 and 1.0219.

For short positions:

Sell euro when the quote reaches 1.0149 (red line on the chart) and take profit at the price of 1.0107. Pressure will return if inflation continues to rise.

Take note that when selling, the MACD line should be below zero or is starting to move down from it. Euro can also be sold at 1.0177, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.0149 and 1.0107.

What's on the chart:

The thin green line is the key level at which you can place long positions in the EUR/USD pair.

The thick green line is the target price, since the quote is unlikely to move above this level.

The thin red line is the level at which you can place short positions in the EUR/USD pair.

The thick red line is the target price, since the quote is unlikely to move below this level.

MACD line - when entering the market, it is important to be guided by the overbought and oversold zones.

Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes.

And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.