Overview of macroeconomic reports
A significant amount of economic reports lined up for Wednesday. The EU will release reports on GDP for the second quarter and industrial production. We don't think that these reports will strongly influence the movement of the EUR/USD pair. The GDP report is the second one out of three estimates, and traders might brush off the industrial production report. The US will release a report on the number of building permits, and in the evening we have the "FOMC minutes" - the minutes of the last meeting of the US central bank. Any market reaction is more likely to remain limited or non-existent.
The main item on today's agenda is the UK inflation report, as it may have a strong impact on the GBP/USD pair. If inflation slows less than forecasts (6.8%), the market may start to increasingly believe that the Bank of England will be raising its interest rate for a long time and tediously at that. However, from our point of view, the pound may only grow momentarily; it no longer has long-term growth prospects. If inflation falls to 6.8% or even lower, there may be a new wave of selling for the British currency.
Overview of fundamental events
There is absolutely nothing to highlight among the fundamental events. No speeches by officials of the Federal Reserve, BoE, or the European Central Bank. Therefore, the market will focus on the macro data. There will be a lot, so the movements of both pairs may be tumultuous.
Bottom line
As mentioned, the main item on the agenda is the British inflation report. All other reports may also affect the movement of one pair or the other, but in the manner we observed on Tuesday. Therefore, we might see a weak reaction, but the price will often reverse and change the direction of its movement. It seems that we are in for another tumultuous day, with only the British inflation report to look forward to.
Main rules of the trading system:
- The strength of the signal is calculated by the time it took to form the signal (bounce/drop or overcoming the level). The less time it took, the stronger the signal.
- If two or more trades were opened near a certain level due to false signals, all subsequent signals from this level should be ignored.
- In a flat market, any currency pair can generate a lot of false signals or not generate them at all. But in any case, as soon as the first signs of a flat market are detected, it is better to stop trading.
- Trades are opened in the time interval between the beginning of the European session and the middle of the American one when all trades must be closed manually.
- On the 30-minute timeframe, you can trade based on MACD signals only on the condition of good volatility and provided that a trend is confirmed by the trend line or a trend channel.
- If two levels are located too close to each other (from 5 to 15 points), they should be considered as an area of support or resistance.
Comments on charts
Support and resistance levels are levels that serve as targets when opening long or short positions. Take Profit orders can be placed around them.
Red lines are channels or trend lines that display the current trend and show which direction is preferable for trading now.
The MACD (14,22,3) indicator, both histogram and signal line, is an auxiliary indicator that can also be used as a source of signals.
Important speeches and reports (always found in the news calendar) can significantly influence the movement of a currency pair. Therefore, during their release, it is recommended to trade with utmost caution or to exit the market to avoid a sharp price reversal against the previous movement.
Beginners trading in the forex market should remember that not every trade can be profitable. Developing a clear strategy and money management is the key to success in trading over a long period of time.
