Analysis of macroeconomic reports:
Few macroeconomic events on Tuesday, but traders can look forward to crucial reports. One might pay attention to the German retail sales report. On Monday, the German reports triggered a fairly good market reaction, but those reports were important, and the retail sales data is secondary of importance. Market participants will keep an eye on the eurozone quarterly GDP and inflation data. However, the market's reaction and the strength of the movement will directly depend on the deviation of actual values from forecasts. Nevertheless, these are important reports that can generate significant market movements. There are no significant reports lined up in the UK and the US.
Analysis of fundamental events:
From Tuesday's fundamental events, only a speech by European Central Bank Vice President Luis de Guindos stands out, but this will not have any impact on the currency pairs during the day. In any case, the ECB meeting was held last week, and ECB President Christine Lagarde has already spoken many times. On Monday, there were also speeches by several colleagues of Lagarde and de Guindos, who stated that interest rates would definitely not rise in the near future. Therefore, it's unlikely that de Guindos will announce any additional tightening measures on Tuesday.
General conclusion:
On Tuesday, there will be few important events, and the dynamics of both currency pairs will depend on the nature of the eurozone GDP and inflation reports. If the data turns out to be stronger than expected, the euro and the pound may continue to correct higher, which is what we are expecting.
Basic rules of a trading system:
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.
