Analysis of Trades and Trading Tips for the Euro
The test of the 1.1329 level in the second half of the day occurred when the MACD indicator had already moved significantly below the zero mark, which limited the pair's downside potential. For this reason, I did not sell the euro.
The decline in the EUR/USD exchange rate observed yesterday, following the release of strong U.S. ISM services data, was driven by the strengthening of the U.S. dollar due to expectations that the Federal Reserve will continue its tight monetary policy. The ISM index, which reflects service sector activity, exceeded forecasted values, indicating the stability of the U.S. economy. This, in turn, triggered dollar growth. In the near future, the pair's dynamics will be influenced by several factors, including tomorrow's decision by the Federal Reserve on interest rates, so no significant volatility in EUR/USD should be expected for now.
This morning, market attention will be focused on several economic indicators for the euro area: the services PMI, the composite PMI, and the Producer Price Index (PPI). These indicators traditionally substantially impact exchange rate dynamics and market sentiment, as they provide insight into the state of the economy and inflationary processes. The services PMI, in particular, is an important barometer of business activity in a key sector of the European economy. An increase in this indicator signals production and consumer demand growth, which could support the euro. Conversely, a decline in the index indicates a slowdown in economic activity and a potential weakening of the euro.
The composite PMI, which combines data from both manufacturing and services, offers a more complete view of the eurozone's economic health. The Producer Price Index reflects changes in the prices of goods and services purchased by businesses. A rise in the PPI may indicate mounting inflationary pressure, potentially causing the European Central Bank to reconsider before cutting interest rates. This could, in turn, lead to the strengthening of the euro. On the other hand, a decline in PPI may signal deflationary risks and potential monetary policy easing, which could put downward pressure on the euro.
For intraday strategy, I will focus primarily on Scenarios #1 and #2.
Buy Scenario
Scenario #1 for buying the euro involves entering around 1.1335 (the green line on the chart) with a target of 1.1375. At 1.1375, I plan to exit the market and open a short position in the opposite direction, aiming for a 30–35 pip move from the entry point. A strong upward movement in the euro in the first half of the day is unlikely. It is important to ensure that the MACD indicator is above the zero mark and just beginning to rise before entering a buy trade.
Scenario #2 involves buying the euro in the event of two consecutive tests of the 1.1312 level when the MACD is in the oversold zone. This would limit the pair's downside potential and could lead to an upward reversal. A rise toward 1.1335 and 1.1375 can be expected.
Sell Scenario
Scenario #1 for selling the euro involves entering after reaching the 1.1312 level (the red line on the chart), with a target of 1.1277. At that level, I plan to exit the market and open a long position in the opposite direction, aiming for a 20–25 pip reversal from the level. Selling pressure on the pair may return at any moment. Before entering a sell trade, make sure the MACD indicator is below the zero mark and just beginning to decline.
Scenario #2 involves selling the euro in the event of two consecutive tests of the 1.1335 level when the MACD is in the overbought zone. This would limit the pair's upward potential and lead to a reversal to the downside. A decline toward 1.1312 and 1.1277 is likely.
What's on the Chart:
- The thin green line represents the entry price where the trading instrument can be bought.
- The thick green line indicates the expected price level where a Take Profit order can be placed, or profits can be manually secured, as further price growth above this level is unlikely.
- The thin red line represents the entry price where the trading instrument can be sold.
- The thick red line indicates the expected price level where a Take Profit order can be placed, or profits can be manually secured, as further price decline below this level is unlikely.
- The MACD indicator should be used to assess overbought and oversold zones when entering the market.
Important Notes:
- Beginner Forex traders should exercise extreme caution when making market entry decisions. It is advisable to stay out of the market before the release of important fundamental reports to avoid exposure to sharp price fluctuations. If you choose to trade during news releases, always use stop-loss orders to minimize potential losses. Trading without stop-loss orders can quickly wipe out your entire deposit, especially if you neglect money management principles and trade with high volumes.
- Remember, successful trading requires a well-defined trading plan, similar to the one outlined above. Making impulsive trading decisions based on the current market situation is a losing strategy for intraday traders.
