Trade review and tips for trading the European currency

The price test at 1.1195 came when the MACD indicator had moved far below the zero line, limiting the pair's downside potential. For that reason, I did not sell the euro.

The week began yesterday with a brief spark of hope for the euro, but it proved short-lived. Protests in France were calmer than feared, and commodity markets softened, which gave the pair some short support. However, a nearly continuous slide then began and European data changed nothing. Germany's Ifo report showed how businesses assess current conditions and expectations. The business-climate index rose to 90.2, above the 89.8 forecast, but the current-conditions reading worsened to 88.8, weighed down by expensive energy that hits firms' costs. This divergence — optimism in expectations alongside weakness in current conditions — looks worrying for the FX market. If Ifo was at 88.8 in August and then rose, the current drop back toward that level means the recovery remains fragile.

Today's European data are unlikely to surprise the market. The euro-area releases include September private-sector credit, M3 money supply, and Spain's Q3 unemployment, and forecasts largely repeat prior values. Private-sector credit is 3.1%, M3 is 3.6% after 3.5%, and Spain's unemployment is 9.90% after 9.87%. The point of these figures is simple. Credit shows whether households and firms are borrowing; the more active borrowing, the stronger the economy, but high rates usually slow lending. In July, private credit grew 4.1% after 3.8% in June, and M3 rose 3.4% after 3.3% — since then, money supply has been slowly accelerating. M3 covers cash and bank deposits, and the European Central Bank watches it as a guide to future inflation. Spain's unemployment gives a view of the labor market in one of the region's largest economies, though its direct FX impact is limited.

After yesterday's decline, which even Asian support and a decent Ifo headline couldn't stop, the euro is struggling on such a neutral backdrop. The ECB is preparing for its October 29 meeting, where a pause is expected, while the dollar is supported by caution ahead of the Federal Reserve decision. I believe that absent strong drivers, EUR/USD will remain under pressure, and these data will only slightly tweak the short-term tone.

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 at around 1.1171 (green line on the chart), targeting a rise to 1.1194. At 1.1194, 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 is just beginning to rise from it.

Scenario No. 2: I also intend to buy the euro today in the event of two consecutive tests of 1.1154 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 1.1171 and 1.1194.

Scenarios for Selling

Scenario No. 1: I plan to sell the euro after it reaches 1.1154 (red line on the chart). The target will be 1.1135, where I intend to exit the market and immediately buy in the opposite direction (expecting a 20–25-pip move from the level). Pressure on the pair will return if data is weak. 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 1.1171 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 1.1154 and 1.1135.

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.