Analyzing Thursday's trades:
EUR/USD on 30M chart
EUR/USD resumed its bullish correction on Thursday, which we expected. We have repeatedly mentioned that we were waiting for a new round of the correction, as we believe that the first round was not pronounced enough against the pair's two-month decline. Moving forward, yesterday's macroeconomic and fundamental factors did not exactly support the euro's rise or the dollar's fall. For instance, the US reports came out stronger than expected, and Federal Reserve Chair Jerome Powell's rhetoric can be considered hawkish. Therefore, we believe that the market is likely leaning towards a correction, although this isn't certain. The price must reach the 1.0673 level in the coming days. Furthermore, a new ascending trendline has formed, but just like the previous one, this is quite weak as well. The entire uptrend has been weak, which means that it is just a simple correction.
EUR/USD on 5M chart
All the levels on the 5-minute chart were almost executed perfectly. Unfortunately, traders could not make use of the most interesting movements as they formed during Powell's speech. However, let's try to understand the signals and trades to see if everything is as straightforward as it seems. In the morning, two buy signals were formed around the 1.0533 level, so beginners should have opened long positions. Subsequently, the pair breached the 1.0559 level. Before Powell's speech, you could have closed all positions or set a stop-loss to breakeven. You could have gained 30 pips on the first case. Meanwhile, the profit on the second case depends on where the stop-loss was set and whether it was triggered.
Trading tips on Friday:
On the 30-minute chart, the pair resumed its upward movement, which can be unstable since it's a correction. We've consistently articulated our anticipation of a decline in the euro over the medium term. However, we were also factoring in a more pronounced pair correction. The key levels on the 5M chart are 1.0391, 1.0433, 1.0451, 1.0483, 1.0533, 1.0559, 1.0611-1.0618, 1.0673, 1.0733, 1.0767-1.0781, 1.0835. A stop loss can be set at a breakeven point as soon as the price moves 15 pips in the right direction. There are no significant events planned in the European Union or the United States, so movements may be weak and unstable, with frequent reversals in various directions.
Basic trading rules:
1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, post which all open trades should be manually closed.
5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trend line or trend channel.
6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
How to read charts:
Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.
Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.
The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.
Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.
Beginning traders should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.
