Analyzing Tuesday's trades:
EUR/USD on 1H chart
EUR/USD showed weak volatility on Tuesday and, in general, seemed unwilling to move. At the beginning of the day, the price attempted to correct upwards, but then bounced down again. Therefore, we can overlook this trading day. The downtrend persists, and we still believe that the euro will fall further. However, it is important to understand that the pair cannot and will not move in only one direction every day. On Tuesday, we witnessed a pause, and on Wednesday, the pair may continue to fall.
As for the macroeconomic events, we can highlight the euro area retail sales report, which predictably turned out to be negative and even worse than expected. The market reacted to it in a rather sluggish manner, as we warned. Also, at the beginning of the week, several European Central Bank officials spoke, but each of them only mentioned that interest rates could start to fall in the first half of the year, which the market knew before the speeches.
EUR/USD on 5M chart
A buy signal was formed around the level of 1.0733 on the 5-minute timeframe. This signal was very inaccurate and challenging to execute. At the end of the day, we removed the level of 1.0733 and added the level of 1.0725. In general, Tuesday's movement was weak and there were no trends. Beginners may have tried to act on this signal, but it is unlikely that they made any profit or even incurred losses.
Trading tips on Wednesday:
On the hourly chart, EUR/USD exhibited a downward movement, as the results of the FOMC meeting were hawkish, and the labor market and unemployment data were very strong. We considered the possibility that the downtrend could end if we received disappointing news, but that did not happen. For now, everything is going as we assumed. The euro is still too overbought and unreasonably expensive.
The key levels on the 5M chart are 1.0568, 1.0611-1.0618, 1.0668, 1.0725, 1.0767-1.0781, 1.0835, 1.0896-1.0904, 1.0940, 1.0971-1.0981, 1.1011, 1.1043, 1.1091. On Wednesday, we can only highlight the German industrial production data, while the US economic calendar is relatively quiet. It will most likely be another boring day after an ultra-interesting week. We believe that the single currency may correct higher again, towards the levels of 1.0781 and 1.0835. Two rebounds from the level of 1.0725 indicate that it would be better to consider longs on Wednesday, and the empty event calendar suggests that macroeconomic factors may not have an influence on market sentiment.
Basic trading rules:
1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, after which all open trades should be manually closed.
5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trendline or trend channel.
6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
How to read charts:
Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.
Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.
The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.
Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.
Beginning traders should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.
