Analyzing Wednesday's trades:
EUR/USD on 30M chart
EUR/USD tried to extend its downward movement on Wednesday, which could potentially evolve into a full-fledged downtrend. However, sellers eventually retreated in the second half of the day. There's nothing alarming about the prospects of a downtrend. The pair rose by only a few dozen pips. The quotes could also fall on Thursday, but for now, it appears to be more of a corrective phase. The price is much closer to its recent local highs than its lows.
The second estimate of Germany's inflation report was released on Wednesday, which was no different from the initial estimate. As a result, there was no notable market reaction. The EU released a retail sales report, which matched forecasts, and the euro edged down after this data. However, the dollar started to fall in the second half of the day, roughly around the time of Federal Reserve Chairman Jerome Powell's speech.
EUR/USD on 5M chart
On the 5-minute chart, only one trading signal was generated. It is actually hard to call it a trading signal. The pair dipped to the 1.0673 level and traded along it for several hours with low volatility. In general, it is difficult to interpret both the pair and the market's behavior at this time. It was probably best to skip this signal, especially with Powell's speech approaching. The 1.0673 level has been adjusted to 1.0668.
Trading tips on Thursday:
On the 30-minute chart, the corrective phase remains intact, but we don't know how long this will last. Take note that the pair remained stagnant for several weeks until the employment and unemployment data were released in the United States. The start of the new week has progressed in the dollar's favor, but the greenback's growth has been relatively weak. We expect a more significant decline in the pair. The key levels on the 5M chart are 1.0451, 1.0483, 1.0526, 1.0568, 1.0611-1.0618, 1.0668, 1.0733, 1.0767-1.0781, 1.0835, 1.0871. A stop loss can be set at a breakeven point as soon as the price moves 15 pips in the right direction. On Thursday, the US will release the report on initial jobless claims, and there will be speeches by European Central Bank and Federal Reserve chiefs, Christine Lagarde and Jerome Powell. These two events are relatively important, but both speeches are scheduled for the evening, so they won't have any impact on trading during the day.
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.
