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The EUR/USD currency pair plummeted by nearly 250 pips on Wednesday. Most of the downward movement occurred overnight, triggered by the U.S. presidential elections. We believe such movements should not be actively traded as the market was overly emotional. After a 250-pip drop, the pair could just as quickly have rebounded by the same amount since there were no objective reasons for the dollar's rise following Donald Trump's victory.
Perhaps fiscal policy will indeed be inflationary under Trump, forcing the Federal Reserve to maintain higher interest rates than it would under Harris. However, if this happens, it would only manifest over the course of a year or two—and even then, it is not guaranteed.
Today, the market's focus will shift to the Fed's meeting. If the Fed adopts a dovish stance or cuts rates by 0.5%, the dollar could easily lose all its gains on Wednesday.
Numerous signals were generated in Wednesday's 5-minute time frame, but the most significant movement occurred during the Asian trading session. The pair traded with volatility and emotion for the rest of the day, ignoring all levels and zones. We believe that after a 200-pip drop overnight, it was unwise to attempt to chase the "departing train" during the day.
On the hourly time frame, the EUR/USD pair may begin a new correction after a month-long decline, as yesterday's drop had little to do with "logical" or systematic market behavior. However, we doubt the correction will be strong, as consistent news supporting the euro would be required for that—and even then, such news would not always help, given the market's current focus on buying the dollar.
For Thursday, our primary advice to beginners is to exercise caution. Price swings may continue, so trading could be attempted at any key level. However, volatility may be high again, and movements could remain emotional.
On the 5-minute time frame, consider the following trading levels: 1.0678, 1.0726-1.0733, 1.0797-1.0804, 1.0845-1.0851, 1.0888-1.0896, 1.0940-1.0951, 1.1011, 1.1048, 1.1091, 1.1132-1.1140. For Thursday, no significant events are scheduled in the Eurozone. In the U.S., the results of the Fed meeting will be announced, followed by Jerome Powell's press conference in the evening.
Support and Resistance Levels: Levels that serve as targets for opening buys or sells. Take Profit levels can be placed around these areas.
Red Lines: Channels or trend lines that indicate the current trend and the preferred trading direction.
MACD Indicator (14,22,3): Histogram and signal line—an auxiliary indicator that can also be used as a source of signals.
Major speeches and reports (always found in the news calendar) can significantly impact currency pair movements. Therefore, it's advised to trade cautiously or exit the market during their release to avoid sharp price reversals against prior movements.
Beginners trading on the forex market should remember that not every trade will be profitable. A clear strategy and money management are the keys to success in long-term trading.
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