Analysis of macroeconomic reports:
There are few macroeconomic events on Wednesday. However, the UK is about to publish a crucial inflation report for May. Inflation reports are highly important for central banks when determining changes in monetary policy. Therefore, today's inflation report could directly influence the outcomes of the Bank of England's meeting tomorrow or in a month and a half.
We don't expect a strong reaction from the market to the inflation report itself. The response may be quite muted even with a resonant value. Regarding the pair's movement, the market may interpret any of the report's value in favor of the British currency, as this has happened quite frequently in the past. UK inflation might slow down to 2% or even lower, allowing the BoE to start easing monetary policy as early as tomorrow. However, a 2.1% value could also easily trigger new long positions on the pound.
Analysis of fundamental events:
There is nothing to highlight from Wednesday's fundamental events. There are no scheduled speeches from representatives of the BoE, the Federal Reserve, or the European Central Bank. However, the British central bank may provide all the necessary information tomorrow, and the ECB and Fed meetings were held just recently, so the market clearly understands what to expect from these two central banks.
General conclusion:
We expect market volatility on Wednesday, but the only event of the day is the UK inflation report. As mentioned before, this report is more likely to boost the pound. The British currency may only fall if inflation slows down below forecasts (1.9-2.0%).
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.
