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The EUR/USD currency pair continued its local decline on Friday, which wasn't driven by anything specific. First, market movements have been very weak for at least a month and a half, indicating a complete unwillingness of market participants to trade. Second, Thursday's European Central Bank meeting can be considered "hawkish," so it should have at least triggered a small strengthening of the euro. Third, the US inflation report showed unchanged readings compared with July, so in fact there are no more grounds for the Federal Reserve to raise rates in September. It is obvious to all traders that inflation will accelerate again in September, but we doubt this will lead the Fed to tighten monetary policy on Wednesday evening. Nevertheless, the market as a whole is confident in tightening, so the dollar strengthened at the end of last week. Dollar strength will likely continue this week because the market believes the Fed will hike rates. On Wednesday evening, we will find out whether that faith is justified.
On the 5-minute TF on Friday, one buy signal was formed. At the start of the US session, price bounced from the 1.1584–1.1594 area, allowing novice traders to open long positions. By the end of the day, the pair failed to continue the rise and returned to the 1.1584–1.1594 area.
On the hourly timeframe, the EUR/USD pair can still resume an uptrend. Considering events from recent months, we believe the euro should continue to rise steadily even without local support. The dollar currently has no growth drivers except the market's near-religious belief in a Fed rate hike.
On Monday, novice traders may open short positions targeting 1.1527–1.1531 if the price consolidates below the 1.1584–1.1594 area. Open long positions targeting 1.1655–1.1665 on a bounce from the 1.1584–1.1594 area.
On the 5-minute TF, consider the levels 1.1366–1.1377, 1.1461–1.1474, 1.1527–1.1531, 1.1584–1.1594, 1.1655–1.1665, 1.1745–1.1754, 1.1830–1.1837. On Monday, Christine Lagarde will give another speech in the euro area, while the US calendar is empty. Thus, volatility will again be low today.
Price levels (areas) of support and resistance serve as targets for opening buy or sell trades or as sources of signals.
Red lines indicate channels or trend lines that show the current trend and the preferred trading direction.
The MACD indicator (14,22,3) — the histogram and signal line — is an auxiliary indicator that can also provide signals.
Important speeches and reports (listed in the news calendar) can significantly influence currency pair movements. Therefore, during their release, traders should approach trading with utmost caution, or exit the market to avoid sudden reversals against the preceding move.
Beginner forex traders should remember that not every trade can be profitable. Developing a clear strategy and practicing money management are key to long-term success in trading.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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