Analyzing Thursday's trades:
EUR/USD on 30M chart
EUR/USD started to correct higher. There were no significant events or reports that could trigger the euro's upward movement. More precisely, there was a report on eurozone GDP, but it turned out to be worse than expected, so it is unlikely for this report to have strengthened the single currency. Moreover, it started during the US trading session, not in the morning, which was when the report was published. However, we have to understand that it is logical for the euro to rise. The pair fell for six consecutive days, so it deserved a small upward retracement. The important thing is that it will not turn into a new uptrend, which would be absolutely illogical.
However, the situation may turn 180 degrees. The US is set to release the crucial NonFarm Payrolls data, as well as the unemployment report on Friday. Such data can fuel a strong upward movement from either the euro or the dollar. The downtrend persists, and we expect bearish movement.
EUR/USD on 5M chart
On the 5-minute chart, the pair spent almost the entire day around the 1.0767-1.0781 range. During the US session, it managed to "break away" from it, which could be interpreted as a buy signal. Therefore, beginners could have opened a long position. At the moment, they are in profit by about 20 pips, and they can confidently close them.
Trading tips on Friday:
On the hourly chart, EUR/USD finally started to trade lower and now it has a real chance to form a new downtrend. EUR/USD has breached the trendline, the pair is overbought, and the eurozone inflation data puts pressure on monetary policymakers to halt their string of interest rate hikes. Therefore, we believe that the euro will continue to fall. The US reports on Friday may spoil the whole picture for the dollar, but the market has finally set itself up to sell, so this should not seriously interfere with the trend.
The key levels on the 5M chart are 1.0568, 1.0611-1.0618, 1.0668, 1.0733, 1.0767-1.0781, 1.0835, 1.0896-1.0904, 1.0940, 1.0971-1.0981, 1.1011, 1.1043, 1.1091. On Friday, Germany will release an inflation report. For the US, four important reports will be released at once, which can greatly affect the pair's movement. First of all, you should focus on the NonFarm Payrolls and unemployment reports, and secondly, on salaries and the consumer sentiment index from the University of Michigan. We expect distinct movements in the second half of 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.
