Analysis of macroeconomic reports:
There's a full plate of macroeconomic events slated for Friday, both secondary and of primary importance. The "weaker" reports will come from Germany, where retail sales and the business activity index in the construction sector will be published. These are secondary data that are unlikely to provoke a market reaction.
The European Union will release an inflation report, which is particularly interesting because inflation may jump to 3% in December. If that happens, it may delay the European Central Bank's first interest rate cut. This is a bullish factor for the euro.
The US will release important data. The Nonfarm Payrolls report has always been known for its significance, and this could stoke volatility. The unemployment rate, the second most important report in the United States, will adjust traders' sentiment after the release of Nonfarm Payrolls. The ISM Business Activity Index in the services sector is also crucial but will be published an hour and a half later, so another sharp price reversal is possible after its release.
Analysis of fundamental events:
Friday sees no fundamental events. Of course, this doesn't mean that central bank officials from the European Central Bank, Bank of England, or the Federal Reserve will not give interviews during the day. However, it appears that at the moment, the market isn't raising questions about the central banks' actions. Questions may arise after the release of the next inflation reports since monetary policy and the sentiment of all central banks continue to depend on inflation. Nevertheless, we don't expect any important speeches on Friday.
General conclusion:
A number of key reports scheduled on Friday. We believe that you should pay attention to the eurozone inflation data, as well as Nonfarm Payrolls and the unemployment rate in the US. This means that the price for both currency pairs can sharply reverse at least twice a day. Reports like the ISM index can also trigger unexpected movements.
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.
