Analysis of macroeconomic reports:
There will be several macroeconomic events on Wednesday. January business activity statistics in the services and manufacturing sectors will be presented in the EU, Germany, the UK, and the US. These are not crucial reports, but in the case of a significant deviation of the actual value from the forecast, they can trigger movements of 50-60 pips. Such occurrences are not common but are certainly possible.
Based on forecasts, we don't expect to see significant deviations from forecasts. The market can only anticipate reactions if all the PMI data in a particular country come in either below or above expectations. In that case, the market may react to these reports. If the values turn out to be mixed, the market will likely lose interest in these data and may not react in a significant manner.
There are no other reports scheduled for Wednesday.
Analysis of fundamental events:
There are no fundamental events scheduled for Wednesday. The European Central Bank meeting will be held this week, while the Federal Reserve and the Bank of England will take place the following week. Therefore, it's not surprising that the market is quiet and waiting for important information that can help it make medium-term conclusions. For now, both currency pairs remain within their own respective sideways channels, with low volatility and no trends.
Take note that central bank representatives are not expected to deliver speeches. Two weeks before a central bank meeting, members of the monetary committees are prohibited from making comments, so they won't be able to make any significant statements.
General conclusion:
On Wednesday, beginners can pay attention to the PMI data. We don't believe that these reports, especially in the run-up to the meetings of three central banks, are capable of ending the sideways movement for both currency pairs. However, the fact that central bank meetings are approaching may push traders to be more active. This is especially true for the EUR/USD pair. We believe it may be the first currency pair to leave the sideways channel.
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, after 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 trendline 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.
