Analyzing Thursday's trades:
EUR/USD on 1H chart
The EUR/USD pair corrected slightly downward on Thursday, but this movement was so weak that it doesn't open any prospects for the dollar yet. What we saw yesterday was just a minor pullback. The price could show a similar-sized pullback today and remain above the trend line. Thus, there are no signs yet of a bearish trend reversal.
Yesterday, indices of business activity in the service and manufacturing sectors were published for the Eurozone, Germany, and the US. None of this data was positive or negative for the dollar or the euro. Morning data from the EU triggered a slight drop in the euro, but the market continues to buy the pair overall. Therefore, growth could quickly resume today. Moreover, Federal Reserve Chair Jerome Powell will speak this evening. This event may have already been factored in, but there remains a chance that the market will use it for new dollar sales.
EUR/USD on 5M chart
In the 5-minute chart, Thursday's movements were not very favorable. The market currently does not know what to do with the pair other than buying it. The price initially bounced off the 1.1132 level, then spent five hours in a total flat, and later surpassed this level. Thus, the first buy signal turned out to be false, while the second was accurate.
Trading tips on Friday:
EUR/USD continues to form an upward trend supported by a trend line in the hourly time frame. We believe the euro has fully factored in all the bullish factors, so we do not expect further upward movement. However, the market again shows it is ready to react to almost any event by panic selling the dollar. And if there are no events, it is prepared to sell the dollar for the sake of it. We can expect a drop in the pair after it consolidates below the trend line.
On Friday, novice traders can expect a continuation of the decline, as the price cannot rise indefinitely. A bounce from the 1.1132 level from below may provide an opportunity to open short positions.
The key levels to consider on the 5M time frame are 1.0726-1.0733, 1.0797-1.0804, 1.0838-1.0856, 1.0888-1.0896, 1.0940, 1.0971, 1.1011, 1.1048, 1.1091, 1.1132, 1.1184, 1.1275-1.1292. On Friday, no major events are scheduled in the Eurozone, while Federal Reserve Chair Jerome Powell will speak in the US. Powell's speech could easily trigger a new dollar decline if the market suspects that his rhetoric is even slightly more dovish than what he has already conveyed during the week.
Basic rules of the trading system:
1) The strength of a signal is determined by the time it takes for the signal to form (bounce or level breakthrough). The less time it took, the stronger the signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be ignored.
3) In a flat market, any currency pair can form multiple false signals or none at all. In any case, it's better to stop trading at the first signs of a flat market.
4) Trades should be opened between the start of the European session and midway through the U.S. session. After this period, all trades must be closed manually.
5) In the hourly time frame, trades based on MACD signals are only advisable amidst substantial volatility and an established trend confirmed by a trendline or trend channel.
6) If two levels are too close to each other (5 to 20 pips), they should be considered support or resistance.
7) After moving 20 pips in the intended direction, the Stop Loss should be set to break even.
What's on the charts:
Support and Resistance price levels: targets for opening long or short positions. You can place Take Profit levels near them.
Red lines: channels or trend lines that depict the current trend and indicate the preferred 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 source of signals.
Important speeches and reports (always noted in the news calendar) can profoundly influence the movement of a currency pair. 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. Developing a clear strategy and effective money management is key to success in trading over a long period.
