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FX.co ★ Key events on January 3: fundamental analysis for beginners

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Forex Analysis:::2024-01-03T10:01:41

Key events on January 3: fundamental analysis for beginners

Analysis of macroeconomic reports:

Key events on January 3: fundamental analysis for beginners

There are several macroeconomic events scheduled for Wednesday. First and foremost, we need to highlight the U.S. reports, some of which are quite important for the market and the dollar. The ISM Manufacturing Purchasing Managers' Index (PMI) is more important than the S&P PMI and often triggers a market reaction. Its value for December is unlikely to show significant growth, but even a small rise can strengthen the dollar. Exceeding the forecast of 47.1 will help the dollar rise further.

The Job Openings and Labor Turnover Survey (JOLTs) report is directly related to the U.S. labor market, which market participants have been paying a lot of attention to over the past year. The latest report showed a weaker value than expected, so today we may see better-than-expected results, which will also help strengthen the greenback.

Among the secondary reports, we can mention the unemployment rate in Germany. However, we do not believe that this will provoke any market reaction, as it is considered secondary of importance. Therefore, you should focus on the U.S. data.

Analysis of fundamental events:

Key events on January 3: fundamental analysis for beginners

Among the fundamental events of Wednesday, we can highlight the release of the minutes from the last Federal Reserve meeting, during which Fed Chair Jerome Powell outlined plans for lowering the key interest rate in 2024. It is unlikely for the minutes to provide new information that differs from Powell's recent statements, but any signs of a dovish sentiment among most officials could put pressure on the dollar. This will be published late in the evening, giving beginners an opportunity to close all their positions and leave the market. In addition, Fed representative Thomas Barkin will speak, which may have a background impact on the dollar.

General conclusion:

On Wednesday, we will probably witness calm movements in the first half of the day, but there could be a spike in emotions in the second half, as market participants will focus on two U.S. reports. Today, the dollar's fate will depend on them. In the evening, the Fed minutes will be released, but by that time, it would be better to leave the market. Tomorrow, we will analyze the minutes and draw conclusions regarding the impact of the FOMC's stance on the dollar in the near future.

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.

Beginners 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.

Analyst InstaForex
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