Trade review and tips for trading the European currency

The price test at 1.1205 occurred as the MACD indicator began moving up from the zero mark, confirming a valid entry point to buy the euro. However, the pair did not go on to rise much.

The euro opened the week with a gap up against the dollar, and while all of Europe is breathing a little easier, it's worth looking at what the market feared. France was the main source of worry. Saturday's protests drew about 400,000 people, according to the interior ministry (organizers estimated about 800,000); nearly a thousand people were detained, and looting was reported, but authorities avoided heavy destruction on the scale of October 17. The market also relaxed somewhat. Moody's kept France at Aa3 and S&P at A+, and last week the spread of French 10-year paper to German bunds hit its widest since 2011 — a key gauge of investor nervousness. The ratings decisions eased tension and eased pressure on the euro.

But the region's problems have not disappeared. On Friday the euro-area composite PMI was 51.9 versus 53.1 in September — a four-month low — and activity in France returned to contraction. For the European Central Bank, this combination of weakening growth and high inflation is difficult, and this week's policy meeting complicates it further.

This morning three Ifo indicators for Germany for October will be released: the business-climate index, the current-situation reading and the expectations index. This set matters because it offers an early read on how German businesses see the months ahead and often provokes a stronger market reaction than official GDP data. Forecasts look surprisingly optimistic: the main business-climate indicator is expected at 90.0 after 89.9, continuing the rise from 88.8 in August. Expectations are forecast at 89.9 after 90.4, and the current-situation reading at 89.4 after 89.5 — so subcomponents are slightly weaker, but the overall index promises a small gain. Only good figures today can support the euro during European trading.

For the intraday strategy, I will rely more on Scenarios No. 1 and No. 2.

Scenarios for Buying

Scenario No. 1: Today, it is possible to buy the euro when it reaches around 1.1224 (green line on the chart), targeting a rise to 1.1240. At 1.1240, I plan to exit the market and also sell the euro in the opposite direction, expecting a 30–35-pip move from the entry point. The euro can only rise today after good euro-area data. Important! Before buying, make sure the MACD indicator is above the zero line and just beginning to rise.

Scenario No. 2: I also intend to buy the euro today in the event of two consecutive tests of 1.1214 when the MACD indicator is in the oversold area. This will limit the pair's downside potential and lead to an upward reversal. One can expect a rise to the opposite levels of 1.1224 and 1.1240.

Scenarios for Selling

Scenario No. 1: I plan to sell the euro after it reaches 1.1214 (red line on the chart). The target is 1.1191, where I plan to exit the market and immediately buy in the opposite direction (expecting a 20–25-pip move from that level). Strong pressure on the pair before Wednesday's Federal Reserve decision is unlikely. Important! Before selling, make sure the MACD indicator is below the zero line and is just beginning to decline from it.

Scenario No. 2: I also intend to sell the euro today in the event of two consecutive tests of 1.1224 when the MACD indicator is in the overbought area. This will limit the pair's upside potential and lead to a downward reversal. One can expect a decline to the opposite levels of 1.1214 and 1.1191.

What's on the chart:

Thin green line — entry price where you can buy the instrument.

Thick green line — approximate price where you can place Take Profit or manually lock in profits, because further upside above this level is unlikely.

Thin red line — entry price where you can sell the instrument.

Thick red line — approximate price where you can place Take Profit or manually lock in profits, because further downside below this level is unlikely.

MACD indicator. When entering the market, it's important to consider overbought and oversold zones.

Important. Novice Forex traders must be very cautious when deciding to enter the market. It is best to stay out before major fundamental reports to avoid getting caught in sharp price swings. If you decide to trade during news releases, always place stop orders to minimize losses. Without stop orders, you can quickly lose your entire deposit, especially if you don't use money management and trade large volumes.

Remember: successful trading requires a clear trading plan, like the example above. Spontaneous trade decisions based solely on the immediate market situation are, by definition, a losing strategy for an intraday trader.