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Analysis of transactions in the EUR / USD pair
A signal to buy emerged after EUR/USD hit 1.1434. However, there was no strong movement because the statements of the ECB failed to support euro bulls and upcoming US inflation data limited the upward potential of the pair.
After the release of the CPI report, euro fell to 1.1412, prompting a signal to sell. But the pair did not go down as expected, and after some time rose to 1.1434. At that moment, the MACD line was moving above zero, thereby provoking a 50-pip increase in the pair. This compensated the losses earlier.
Data released yesterday showed that US CPI rose 7.5% year-over-year, after rising to 7% in December 2021. Most likely, the index increased because of extended gains in food, electricity and housing prices. Those were also the reasons why inflation rose 0.6% a month earlier. Core CPI, which excludes energy and food prices as well as alcohol and tobacco, also increased 6% y/y and 0.6% m/m.
Germany will release its latest CPI report today, and that could provoke a further dip in EUR/USD provided that the figures turn out weaker than expected. Meanwhile, upcoming statements from ECB representative Frank Elderson are unlikely to affect the market, so traders can just ignore it.
In the afternoon, a deeper decline may occur if the US releases strong data on consumer sentiment. But if the figure is lower than the forecast, the pair will have a chance to rally. Inflationary expectations from the University of Michigan are unlikely to affect the market because everything is already clear with this component.
For long positions:
Buy euro when the quote reaches 1.1397 (green line on the chart) and take profit at the price of 1.1397 (thicker green line on the chart). A rally will occur if the inflation report from Germany exceeds expectations.
Before buying, make sure that the MACD line is above zero, or is starting to rise from it. It is also possible to buy at 1.1373, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.1397 and 1.1451.
For short positions:
Sell euro when the quote reaches 1.1373 (red line on the chart) and take profit at the price of 1.1330. Weak data from the Euro area will increase pressure in the market as demand is likely to decrease amid growing expectations for a tighter Fed policy.
Before selling, make sure that the MACD line is below zero, or is starting to move down from it. Euro can also be sold at 1.1397, however, the MACD line should be in the overbought area, as only by that will the market reverse to 1.1373 and 1.1330.
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 decisions based on the current market situation is an inherently losing strategy for an intraday trader.
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