Analyzing trades on Thursday
EUR/USD on M30 chart
The EUR/USD pair has been going through a correction against Wednesday's movement throughout Thursday. A day earlier, the pair advanced by about 80 pips despite the fact that there were no important fundamental factors on that day. Thus, on Thursday, markets seem to have offset the previous rise of the pair and pushed it back down. As a result, the pair closed the day near the level of 1.1290 which is very close to the yearly lows. This means that on Friday traders may try to test these lows once again. Nevertheless, the uptrend is now in place as the quotes consolidated above the downward channel on Wednesday. This may also happen if one of the groups of traders is not active in the market. At this time, it is very likely that there are no bulls. The bears could take some of the profit on short positions on Wednesday, while the bulls did not support the start of the uptrend with new long positions. As a result, the pair left the channel but was not able to continue the upward movement. If this is the case, then the euro will continue to fall.
EUR/USD on M5 chart
On the 5-minute time frame, the technical picture on Thursday was not perfect but still had something to offer. Trading was possible on this day with good results although few trading signals were generated. The first one - to sell - was formed when the pair broke through the level of 1.1334. Here, novice traders should have opened short positions, according to our recommendations. By the beginning of the US trading session, the pair had reached the level of 1.1307 and bounced off it, forming a buy signal. Thus, sell orders should have been closed with a profit of 12 pips and long positions had to be opened. But the upward movement did not continue as the signal turned out to be false. A bit later, the price consolidated below the level of 1.1307 and continued to move down. Thus, it was necessary to close long positions manually (12 pips of losses) and reopen sell orders. Later in the day, the pair dropped by another 15-20 pips, and it was necessary to close the trades manually. Thus, the total profit was about 15 pips. Not much, but still better than losses.
Trading tips on Friday
On the 30-minute time frame, the downtrend was canceled and replaced by an upward movement. However, judging by the trading dynamic on Thursday, the pair is unlikely to continue its upward movement. Actually, it is more likely to resume a downtrend on Friday if the US inflation report turns out to be stronger than forecasts. On the 5-minute time frame, the key levels for December 10 are 1.1259-1.1266, 1.1307, 1.1344, 1.1348, and 1.1371. A Take Profit should be set at a distance of 30-40 pips. A Stop Loss should be placed to a breakeven point as soon as the price passes 15 pips in the right direction. On the M5 chart, the nearest level could serve as a target unless it is located too close or too far away. If it is, then you should act according to the situation or trade with a Take Profit. On Friday, ECB head Christine Lagarde will deliver a speech. It is 30% likely that her words will surprise the markets. But still, this event should not be overlooked. The report on US inflation will be much more important. According to experts' forecasts, the consumer price index in November should grow to 6.7% y/y. Such value is difficult to exceed. Therefore, a situation is possible in which inflation will continue to accelerate, but will be below the forecast. We can only guess how markets will react to this situation.
Basic rules of the trading system
1) The strength of the signal is determined by the time the signal took to form (a bounce or a breakout of the level). The quicker it is formed, the stronger the signal is.
2) If two or more positions were opened near a certain level based on false signals (which did not trigger a Take Profit or test the nearest target level), then all subsequent signals at this level should be ignored.
3) When trading flat, a pair can form multiple false signals or not form them at all. In any case, it is better to stop trading at the first sign of a flat movement.
4) Trades should be opened in the period between the start of the European session and the middle of the US trading hours when all positions must be closed manually.
5) You can trade using signals from the MACD indicator on the 30-minute time frame only given that volatility is strong and there is a clear trend that should be confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 pips), they should be considered support and resistance levels.
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 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, and 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 patterns (channels and trend lines).
Important announcements and economic reports that you can always find on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.
