Analysis of macroeconomic reports:
There will be very few macroeconomic events on Thursday. We can only highlight the U.S. report on unemployment claims. Besides this secondary report, traders will not pay much attention to anything in the US, the UK, Germany, or the European Union. Therefore, we will likely witness low volatility and very sluggish movement for both pairs.
Analysis of fundamental events:
There will be several fundamental events on Thursday. Federal Reserve representative Thomas Barkin will speak. European Central Bank representatives Pierre Wunsch, Philip Lane, and Elderson will speak, and in the UK, we have Bank of England Mann and Dhingra. It is difficult to say whether any of them will deliver a statement that is capable of influencing trader sentiment. On Wednesday, several Fed officials spoke, and we have already heard comments from the ECB officials in the first two days of the week. As we can see, they did not make any significant statements, which is not surprising, as all three central banks recently had meetings, and the market already received comprehensive information on monetary policy, inflation, expectations, and forecasts.
General conclusion:
On Thursday, both currency pairs may continue to correct higher, which would be logical. However, it is important to remember that we currently have downtrends for the euro and the pound, meaning that the decline may resume. Traders will have to solely rely on levels, as the macroeconomic and fundamental backdrop will not have any impact on the pair's movement. For the euro, a bounce from the 1.0781 level may bring back the downward movement, while the situation for the pound is more complex.
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.
