On Wednesday, February 24, the euro was beginning to make gains against the U.S. dollar after losing quite a bit of strength over the last several days before this. In pre-U.S. trading hours, the euro gained some traction, then lost it right before the New York markets opened for business. After a few hours, though, the EUR/USD had risen by more than 20 pips, and was continuing to show signs of strength.
The euro had made a lot of gains as of late, but with recent European bank decisions and worldwide decline in oil, the dollar had once again risen as the strongest moving currency. Experts had predicted that the euro would either drop or move sideways for the coming weeks, and that’s still exactly what we are seeing. Despite a very strong Wednesday morning, the EUR/USD is still down over the last five days. The drop has been in the triple digit pip range, and a recovery makes sense after a substantial decline like this. It makes even more sense when you consider the fact that overnight, during Asian trading hours, the euro tanked even further. The 20 plus pip recovery seen early in New York hours is actually up more than 100 pips when you take what happened with the London and European sessions into account.
Forex and binary options traders need to have a full view of the world sentiment on a currency pair when they begin their trading day. If you’re an American trader, looking at what happened the night before in Tokyo or in London will be a helpful guide for you for the rest of the day, especially if there are no major announcements or events scheduled to happen in the U.S. on a given day. These sessions are not exact continuations of the previous ones, but if a currency tanks in Tokyo, then shows signs of recovery in London, like what we are seeing today with the EUR/USD. Momentum from session to session can occur, and if you are on the lookout for it, you can often make highly accurate longer term trades without an actual need for technical analysis. Of course, you should always use your technical tools before entering a position, but when a setup like this occurs for you, this is more of a method of double checking than it is a tool for finding trading opportunities. Thankfully, the currency market has been fairly predictable for traders that are looking out a few hours in the future. And while this might not have the same appeal that high frequency trading or 60 second options have, it can be extremely profitable when done right.
It’s interesting to note that if you look at the analysis that had come out just before the trading day opened, it was expected that the dollar would be strong. The same analysis also looked at gold and other precious metals, saying that they were on pace to outperform the market. They were right in one respect with gold, but not with the dollar, at least for the EUR/USD pair. Sometimes things like this happen, and while it is important to read the reports and get the opinions of the experts in order to prep yourself for the trading day, they can be wrong. You should always do your own analysis for precisely this reason. The experts can give you a good starting point, but when the markets start doing things that were not predicted, if you want to stay profitable you need to be able to make your own decisions when it comes to finding trading opportunities.