Analyzing Monday's trades:
EUR/USD on 1H chart
EUR/USD finally broke through the 1.0835 level on Monday, which enabled it to resume its downward movement. This movement is still weak, as is the volatility over the past days, weeks and even months. Nevertheless, the euro is moving downwards, which is what we need. Do recall that we have repeatedly predicted the euro's fall.
The only important event of the day was the speech of European Central Bank Vice President Luis de Guindos. Unfortunately, he did not say anything interesting. He only mentioned that the "ECB will cut interest rates when we are sure that inflation meets our 2% goal." He praised the progress in fighting high inflation in recent months, but all this information did not bring the market any closer to answering the question of when the rate cut cycle will start. And traders are still wondering about this. So far we see the mood changing to a more dovish one. So now market participants expect a faster transition to the dovish policy compared to a month ago. Plus, the euro has been overbought for a long time and is overdue for a decline.
EUR/USD on 5M chart
Two trading signals were generated on the 5-minute timeframe. Initially, the pair broke through the level of 1.0835, and then bounced off it from below. Therefore, beginners could open short positions on Monday. The price did not reach the nearest target level, as volatility was weak. Nevertheless, it was possible to earn about 15-20 pips from the single trade, which is quite decent, considering that volatility was just around 50.
Trading tips on Tuesday:
On the hourly chart, EUR/USD seems ready to resume the downward trend, and it finally left the sideways channel after a two-week break. Therefore, we expect the euro to fall further, as before.
On Tuesday, we expect the pair to show a sluggish downward movement. Just a few important events during the day, so volatility may remain low. Nevertheless, you may consider staying in short positions with targets at 1.0781 and 1.0733.
The key levels on the 5M chart are 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, 1.1132-1.1145, 1.1184. On Tuesday, the EU will publish the GDP report for the fourth quarter. The EU economy is expected to lose an additional 0.1%, so this report is unlikely to provide strong support for the euro. The US will release a JOLTs report on job openings. In case of a significant deviation from the forecast value, this report may provoke a market reaction.
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, 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.
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.
