Analyzing Monday's trades:
EUR/USD on 30M chart
EUR/USD traded marginally higher on Monday. It appears that the pair intends to form another leg of the bullish correction. Each of the previous legs was accompanied by a short-term ascending trendline. This might be the case once more. However, take note that this week is filled with crucial events and reports, so by the end of the week, the pair could go anywhere.
We highlight two reports on Monday. Germany released its quarterly GDP report and inflation for October. Both reports turned out better than expected, and the euro rose. Similar reports for the European Union will be released on Tuesday, and we can now expect values stronger than the forecasts. Thus, the new leg of the correction could be supported by economic reports.
EUR/USD on 5M chart
On the 5-minute chart, several trading signals were generated on Monday. Unfortunately, the very first sell signal around the 1.0558 level turned out to be a false move. The pair would probably have fallen, but then the euro was boosted after the German GDP and inflation numbers. Right after, a buy signal was formed, and beginners could earn about 30 pips. Traders could have also executed the rebounds from the 1.0611-1.0618 area, but three rebounds occurred around that region, and none of them initiated any movement. So, the day ended with low profit, considering the first trade.
Trading tips on Tuesday:
On the 30-minute chart, the pair has consolidated below the ascending trend line, which means that the euro can move downwards. EUR/USD may fall as early as the end of this week, but it seems the market is considering an upward retracement before it decides to bring back the downtrend. This retracement, with the support of the macroeconomic background, could very well develop into a new leg of the correction. The key levels on the 5M chart are 1.0391, 1.0433, 1.0451, 1.0483, 1.0526, 1.0568, 1.0611-1.0618, 1.0673, 1.0733, 1.0767-1.0781, and 1.0835. A stop loss can be set at a breakeven point as soon as the price moves 15 pips in the right direction. From the EU, market participants will keep an eye on the eurozone quarterly GDP and inflation data set for release on Tuesday. If the values turn out stronger than expected, the pair could trade higher. However, take note that all the recent upward movement in recent weeks have been corrective phases.
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.
