Analysis of macroeconomic reports:
There will be few macro data releases on Wednesday. You can take note of the UK and the EU's inflation reports. And while the European inflation report is practically of no use, traders will likely be interested in the UK inflation data, so we might see a reaction. The European inflation data is published in two estimates. Naturally, they rarely differ from each other and the market pays more attention to the first estimate. Therefore, the final estimate has extremely low chances of provoking a reaction. Inflation in the EU is likely to fall to 6.9% annually, which significantly reduces the chances of the European Central Bank going for a 0.5% rate hike in May.
UK inflation may also slow down significantly after rising last month. The question is how much it will slow down. Forecasts predict a value of 9.8-10.2% annually. I believe that the difference could be anything. This means that we don't know how the market will react. In recent weeks, traders have used any opportunity to buy the pound. Sterling even managed to appreciate on Tuesday even when the macro data worked against it. Therefore, be prepared for any movements.
Fundamental events:
Among the fundamental events on Tuesday, you can take note of the speech of ECB Chief Economist Philip Lane and the Federal Reserve's Beige Book report. Both of these events have an extremely low degree of significance. The Beige Book has a 99% probability of not provoking a reaction, as it is simply a summary of economic reports by region. Additionally, it will be released quite late, by which time novice traders should have already left the market. The potential of Philip Lane's speech is higher. He may share something important about the ECB's monetary policy, particularly hinting at the interest rate decision that may be made in May. The more hawkish his stance is, the higher the chances of seeing the euro rise. And vice versa.
General conclusions:
Wednesday promises to be a rather dull day, at least for the EUR/USD pair. Meanwhile, the UK will release its inflation report, which is particularly important for the pound so volatility will be higher. Besides that, the pairs may show different dynamics and directions of movement, as British inflation has nothing to do with the euro or the dollar. Of course, it often happens that the pound pulls the euro along, and vice versa, but there is still a possibility that the two main currency pairs will move in different directions on Wednesday.
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.
