Analyzing Wednesday's trades:
EUR/USD on 1H chart
EUR/USD showed clear signs of strength on Wednesday. Naturally, the pair's growth was associated with only one event – the FOMC meeting and its results. The Federal Reserve left its key interest rate unchanged, as the market expected, but did not tighten its monetary policy plans, as some market participants and experts anticipated. The latest inflation report showed that prices accelerated, so the market could have expected a tightening of rhetoric from the FOMC yesterday. However, this did not happen, disappointing dollar buyers. In our opinion, the dollar fell too sharply, but we have become accustomed to such a state of affairs. The dollar rose for two weeks, and then practically lost all its gains in just a day.
EUR/USD on 5M chart
Several signals were generated on the 5-minute timeframe. Initially, the pair settled below the level of 1.0855, so novice traders could open short positions. However, the price only fell by 5-10 pips. Therefore, during the US session, when a buy signal was formed around the same level of 1.0855, it was advisable to close shorts and open long positions. Then, considering the FOMC meeting, it was possible to set the Stop Loss to breakeven and wait for further developments. As a result, the FOMC meeting supported the pair's growth, and the price climbed to the level of 1.0940, where traders could take profits. About 50 pips were earned from these two trades.
Trading tips on Thursday:
On the hourly chart, EUR/USD has started to move downwards, but it may have already ended its downward movement since yesterday's FOMC meeting triggered a sharp decline in the dollar. It is not easy to identify the trend on the hourly time frame. We should wait it out, as the results of the FOMC meeting cannot be considered dovish. It is quite possible that today, we will see a reverse move and the dollar may even strengthen.
The key levels on the 5M chart are 1.0568, 1.0611-1.0618, 1.0668, 1.0725, 1.0785-1.0797, 1.0855, 1.0888-1.0896, 1.0940, 1.0971-1.0981, 1.1011, 1.1043, 1.1091. On Thursday, German and euro area Purchasing Managers Index (PMI) data will be released. The US docket will also feature PMI data, as well as reports on initial jobless claims, new home sales, and business activity in Philadelphia. All these reports can be considered secondary of importance, as they are unlikely to provoke a strong 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.
