Analysis of macroeconomic reports:
There's a full plate of macroeconomic events slated for Tuesday. The day will start with UK reports on unemployment and wages. It's worth noting that wages partly contribute to high inflation in the UK, so a decline will exert pressure on the pound, while an increase will provide support. As for unemployment, the lower it is, the better for the British pound.
The EU's economic calendar will feature the February ZEW Economic Sentiment Index for Germany and the bloc. These reports are of secondary importance, so we do not expect a strong reaction. The main item on today's agenda is the US Consumer Price Index (CPI) for February. Market players expect a decrease to 2.9-3.1%, and we can't say that such a value will support the US dollar, as it would indicate that the Federal Reserve may move towards monetary easing sooner than expected.
Analysis of fundamental events:
Among the fundamental events of Tuesday, we can highlight the speeches of European Central Bank officials Buch and Tuominen. However, we've already seen that the market is not quite interested in these speeches even if the officials make important remarks. Buch and Tuominen will likely report something interesting regarding monetary policy, but we shouldn't expect a strong market reaction to their speeches.
General conclusion:
On Tuesday, both currency pairs will have more reason to show significant movements than in the last five days. The UK will release important reports, and the US will release a crucial report. We expect stronger movements during the US trading session, but the direction of both pairs will depend on the nature of the data. With neutral data, the British pound has a tendency to rise, while the euro currently maintains a bearish bias.
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.
