The EUR/USD pair managed to start the long-awaited correction last Tuesday night, which immediately led to price taking below the upward trend line. Thus, at this moment we can conclude that the trend for the euro/dollar pair has changed to a downward one, therefore, novice traders are no longer advised to take buy positions. At the same time, you should also wait for the upward correction, so that the MACD indicator is slightly discharged to the zero levels. It was theoretically possible to open short positions by having the price settle below the trend line, but this sell signal appeared at night (when most traders were already sleeping), and secondly, almost at the very end of the downward movement. The 1.1696 level is the nearest target, which has long been the lower limit of the horizontal channel of $1.17- $ 1.19. Accordingly, the probability that the price would rebound from this line is extremely high.
The fundamental background for the US dollar. The greenback actually rose in price last night. There is even a reason for this. US President Donald Trump, who, despite the coronavirus, had already been discharged from the hospital and returned to the White House, officially completed negotiations with Democrats regarding a new aid package for the American economy. Let us remind novice traders that the aid package implies cash injections into those sectors of the economy that have been most affected by the pandemic and the crisis caused by it. This is done in order to avoid the mass bankruptcies of companies and mass layoffs of employees. Also, the package of economic assistance implies payments to the unemployed and poorly protected segments of the population. This is the kind of aid package that Democrats and Republicans have negotiated since early August. The Democrats insisted on at least 2 trillion in aid, the Republicans offered a maximum of 1. As a result, the parties failed to reach an agreement and Trump officially announced that negotiations with the Democrats were over and would only resume after the elections were over. "I ordered my representatives to stop negotiating until the post-election period," Trump wrote on Twitter. Oddly enough, this news should have been bad for the dollar. However, the US dollar rose in price. Today, European Central Bank President Christine Lagarde is scheduled to speak in the EU, and the minutes of the US Federal Reserve will also be released today. As we mentioned earlier, there will likely be no response to these two events. The only hope is for some loud statement from Lagarde. And of course, we continue to monitor news from the White House.
Possible scenarios for October 7:
1) Buy positions on the EUR/USD pair have ceased to be relevant at the moment since the price settled below the rising trend line. Now, in order to consider them again, you need to wait for a new upward trend or some strong buy signals, such as a rebound from the 1.1696 level. We can only consider new long positions in this case.
2) Sell positions, after the trend changed to a downward one, became relevant. However, the pair has already gone down by around 70 points, and such volatility for the euro is quite high. Thus, we recommend novice traders to wait for an upward correction and start trading downward with targets at the support levels of 1.1707 and 1.1680 after it is completed by the MACD signal. Take note that the 1.1696 level may turn out to be an insurmountable obstacle for the pair.
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.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.
