Analysis of macroeconomic reports:
On Wednesday, there will be a few macroeconomic events in the world. We are primarily interested in the European Union and the United States. The European Union will not release any reports. On the other hand, the US will release its important inflation report for March, which is also extremely contradictory. The contradiction lies in the fact that the main indicator has been falling for 8 or 9 consecutive months, and no one doubts that the latest report will show a new slowdown. On the other hand, core inflation has been falling for the last 5 months but then it might suddenly show growth this time. What is the difference between these indicators and what is the catch?
The catch is that the Federal Reserve, according to its representatives, pays more attention to core inflation (excluding energy and food prices). If this indicator does not slow down at the end of March, it would mean that the Fed will have to raise the key interest rate further, which is a good thing for the dollar. The main inflation indicator is considered the overall reference point, and it is likely to fall to 5.2-5.3%, which significantly reduces the probability of a more aggressive tightening of the Fed's monetary policy, and this is already bad for the dollar. So the main question is: to what extent will the actual values correspond to the forecasts, and which of the indicators will traders pay more attention to? It is impossible to answer these questions, so we should be prepared for any outcome.
Analysis of fundamental events:
Among the events, I am going to highlight the speech of European Central Bank Vice President Luis de Guindos, as well as two speeches by Bank of England Governor Andrew Bailey. In both cases, the market will be expecting new comments on monetary policy and interest rates. Take note that both officials may not comment on the topic that traders are interested in. Therefore, everything will depend on what exactly de Guindos and Bailey say, as well as how resonant their stance will be.
General conclusions:
Wednesday promises to be quite interesting, at least due to the US inflation report. However, please remember that both major pairs have been moving in an illogical manner for several weeks now. The euro and pound, in general, continue to rise, although there are far fewer reasons for this than for the dollar's growth. On Wednesday, a situation may arise in which the market simply interprets the inflation report in favor of the euro and pound, without paying attention to the data's actual values.
Basic rules of the trading system:
1) The strength of the signal is determined by the time it took the signal to form (a rebound 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 a false signal (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 amid strong volatility and a clear trend that should be confirmed by a trendline 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 trendlines).
Important announcements and economic reports that can be found 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.
