Analysis of macroeconomic reports:
There are fewer macroeconomic events on Friday. We can only highlight the German inflation report for January. However, this report is unlikely to trigger any market reaction since this will be the second reading, which is unlikely to differ from the first. Therefore, Friday may bring confusing and low-volatility movements for both currency pairs. At the same time, take note that both pairs have developed downward trends, making downward movement more preferable.
Analysis of fundamental events:
No fundamental events planned for Friday. However, this will have absolutely no impact on the nature of the movements, as several representatives of the European Central Bank and the Federal Reserve have already spoken earlier this week, and as we can see, their speeches had no influence on market sentiment. We only learned that the Fed is not in a rush to cut US interest rates, and the ECB is still contemplating when to start easing monetary policy. But traders are not invested in this information.
General conclusion:
On Friday, both currency pairs may continue to move in a chaotic manner. Corrective movements for both pairs are enough for us to expect that the downward movement may resume. However, this week's volatility has been low, and the macroeconomic and fundamental background is weak. Therefore, it is difficult to expect strong, trending movements from the euro and the pound. Nevertheless, it would be much easier for us to expect a decline than growth.
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.
