Analysis of Monday’s deals:
30M chart of the EUR/USD pair
The EUR/USD currency pair resumed its corrective movement on Monday after overcoming the ascending trend line. Therefore, from a technical point of view, everything is going according to plan. The upward trend is broken, so the quotes are more likely to fall. This week, the mood of traders may change several times, as the news calendar is filled with important reports and events. So far, however, everything is going as it should be. Two important reports were published in the European Union, and it is very difficult to say which one was more important. On the one hand, the GDP report for the third quarter showed an increase of only 0.2%, which is very small. Therefore, the euro’s fall during the day was logical. On the other hand, the inflation report for October showed another acceleration of the indicator to 10.7%. It would seem that the euro should have risen in price based on this information, since the higher inflation, the more likely that the European Central Bank will continue to tighten monetary policy. But the ECB’s last meeting took place last week, so the rate will definitely not increase in the next month and a half. And the results of the Federal Reserve meeting will be announced this Wednesday, at which the rate will also be raised, most likely by 0.75%. Therefore, we tend to believe that the Fed meeting is now in first place in terms of significance for the market.
5M chart of the EUR/USD pair
In regards to Monday’s trading signals on the 5-minute timeframe, everything was as simple as possible. The first signal was formed only at the US trading session, when the price overcame the level of 0.9895. Novice traders could work it out, but they hardly earned much from it, since during the evening (when you should close all positions manually and leave the market), the price did not go down far from the formation point. However, a dozen pips of profit could be made. There was good volatility and a good trend movement during the day, but it was not possible to catch its beginning.
How to trade on Tuesday:
The pair has consolidated below the trend line on the 30-minute timeframe, so we expect the fall to continue. A rate hike from the Fed should provoke a strengthening of the US currency, that is, a fall in the euro/dollar pair. And it is quite possible that the market has already begun to work out this event “in advance”. On the 5-minute TF on Tuesday, it is recommended to trade at the levels of 0.9709, 0.9756, 0.9807, 0.9877, 0.9977, 1.0020-1.0034, 1.0093. When passing 15 points in the right direction, you should set Stop Loss to breakeven. There will be no reports or other events in the European Union. On the other hand, a rather important ISM index on business activity in the manufacturing sector will be released in the US. There may be a reaction to this report, especially since the “standard” PMIs have gone below the “waterline”, that is, below the level of 50. It will be interesting to see what the ISM index will show.
Basic rules of the trading system:
1) The signal strength is calculated by the time it took to form the signal (bounce or overcome the level). The less time it took, the stronger the signal.
2) If two or more positions were opened near a certain level based on false signals (which did not trigger Take Profit or the nearest target level), then all subsequent signals from this level should be ignored.
3) In a flat, any pair can form a lot of false signals or not form them at all. But in any case, at the first signs of a flat, it is better to stop trading.
4) Trade positions are opened in the time period between the beginning of the European session and until the middle of the US one, when all positions must be closed manually.
5) On the 30-minute TF, using signals from the MACD indicator, you can trade only if there is good volatility and a trend, which is confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 points), then they should be considered as an area of support or resistance.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14,22,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important speeches and reports (always contained in the news calendar) can greatly influence the movement of a currency pair. Therefore, during their exit, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
The material has been provided by InstaForex Company – www.instaforex.com