Analysis of macroeconomic reports:
For Friday, the lineup of macroeconomic events is quite considerable. Let us start with the US reports as they can be crucial for the US dollar. In recent weeks, the greenback has been under market pressure. Even the recent FOMC meeting, which we believe was clearly not dovish, did not help the situation. This week, the dollar could have strengthened but failed to do so. Therefore, today is the dollar's last chance to turn the situation around. If today's reports on Non-Farm Payrolls, unemployment, wages, and ISM Business Activity Index turn out worse than forecasted, then both instruments will continue to go through a correction, and the dollar may weaken further across the market. No important reports are scheduled for today in the European Union and the United Kingdom.
Analysis of fundamental events:
Among today's fundamental events, we can highlight Federal Reserve officials Austan Goolsbee and Christopher Waller's speeches. However, both speeches will take place late in the evening, which is when the market is already preparing to close. During the day, these events will have no impact on the dollar exchange rate. Moreover, Fed Chair Jerome Powell already spoke this week, which clarified everything. Thus, traders are unlikely to receive new information about the Fed's monetary policy.
General conclusion:
There are several important events on Friday. Almost all the most significant reports will be released at the beginning of the US session, with the ISM index coming out an hour and a half later. Therefore, by then, we expect sharp movements, and sharp reversals in both currency pairs. The direction of movement will entirely depend on the nature of the US macro data.
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.
