Hourly chart of the EUR/USD pair
The EUR/USD pair sharply turned up in the morning and started a fairly strong upward movement. Thus, after a few hours, the pair crossed the second downward trend line, which changed the current trend to an upward one. Now both trend lines are marked with a dotted line, as they have already lost their relevance. In our last euro article for beginners, we recommended trading up if the price breaks the trend line again. This signal turned out to be correct. Novice traders following our recommendations should have opened long positions at the close of the candlestick, where the trendline was broken, and in this case, by the time trading ended on Friday, they would have been in profit of 41 points. The buy signal was not canceled, therefore, in principle, it was possible not to close long positions. However, we always recommend not to postpone open trades to a new week, since a gap is possible at the opening of trades on Monday. The fact is that the market does not work on weekends, but the news continues to come. Therefore, on Monday the rate of the pair may not be the same as at the close on Friday. There was no signal to sell on Friday, so there was no need to trade for a fall that day.
The macroeconomic background was very, very interesting on Friday, February 5. All the most interesting reports have been published in America. And although we have repeatedly drawn the attention of traders to the fact that the markets continue to ignore statistics, it would be unreasonable to skip the NonFarm Payrolls report. The actual value of the number of new jobs created outside agriculture in January was 49,000, which is 36,000 less than forecast. Formally, the report was weaker than the forecast, so the markets had a reason to sell the dollar that day. However, we believe that the NonFarm report is only 20% of the general basis for the dollar’s decline on February 5. The dollar began to fall in the morning, so the Nonfarm report had no impact, at least until the afternoon. In addition to this, a report on unemployment was published, which fell from 6.7% to 6.3% and this is very good news, to which the dollar did not react in any way. Consequently, the markets reacted to the US reports somehow one-sided. We believe that the main reason for the pair’s growth is technical.
European Central Bank President Christine Lagarde will speak on Monday, February 8. Recently, Lagarde rarely indulges traders with important and meaningful speeches. This will most likely be the case on Monday as well. In any case, her presentation will take place late in the evening, so nothing will interfere with trading on technical signals during the day.
Possible scenarios on February 8:
1) Long positions are currently relevant, since the price has crossed the trend line for the second time. So now novice traders are advised to wait for the correction and discharge of the MACD indicator to the zero level, afterwards we wait for a new buy signal and buy the pair while aiming for resistance levels 1.2059 and 1.2073.
2) Trading for a fall has ceased to be relevant at the moment. So now novice traders need to wait for a new downward trend and only after that should you consider trading options for a fall. At least, this option is not expected to be implemented tomorrow.
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.
The material has been provided by InstaForex Company – www.instaforex.com
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