Analyzing Monday's trades:
EUR/USD on 1H chart
EUR/USD continued to trade lower on Monday with slightly higher volatility than we observed on average last week. The US ISM Manufacturing Purchasing Managers' Index boosted the dollar. Take note that this is an important indicator for the U.S. market and the dollar. Since its value turned out to be higher than forecasts and was above the 50 mark, the report strengthened the dollar. In fact, it strengthened more than we had anticipated.
However, in general, it doesn't matter how much the dollar strengthened. The main thing is that it did, as required by the current technical picture and fundamental backdrop. The downtrend remains intact, and the euro may continue to fall for quite some time if the market does not resume unwarranted purchases. With each passing day, there is growing belief that the European Central Bank will be the first to start cutting rates and will reduce them more than the Federal Reserve by 2024. This factor alone should continue to push the pair down.
EUR/USD on 5M chart
A sell signal was formed on the 5-minute timeframe. The pair was flat for most of the day, and it only started trading lower during the U.S. session. Thus, novice traders could open short positions based on this signal, and it was advisable to manually close the short closer to the evening. The profit amounted to at least 30 pips.
Trading tips on Tuesday:
On the hourly chart, EUR/USD continues to move downward, which corresponds to the fundamental background. We believe that the euro should fall anyway, as the price is still too high, and the global trend is downward. Unfortunately, the market doesn't always want to trade the pair in a logical manner, and from time to time, we observe unreasonable growth. The pair's movements on Monday were stronger, but it was triggered by the ISM index. We may see low-volatility movements on days without a strong macroeconomic backdrop.
On Tuesday, you can try trading bearish again, but the EU and the US will release reports that could also trigger the pair's rise. In any case, it is advisable to look for sell signals and react to important reports.
The key levels on the 5M chart are 1.0568, 1.0611-1.0618, 1.0668, 1.0725, 1.0785-1.0797, 1.0838-1.0856, 1.0888-1.0896, 1.0940, 1.0971-1.0981, 1.1011, 1.1043, 1.1091. The German inflation report is due early Tuesday. The US JOLTs report on job openings in February is also scheduled for release. It's not the most important report, but its resonant value may still 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.
