Analyzing Wednesday's Trades:
EUR/USD on 1H Chart
The EUR/USD pair edged up on Wednesday. Another drop in the US dollar was triggered exclusively by one event—the release of the JOLTS report on the number of open vacancies in the US. At the beginning of the week, we warned that data on the labor market, unemployment, and ISM business activity indices could negatively affect the dollar's exchange rate. So far, everything is going according to plan. On Tuesday, the mediocre ISM Manufacturing Index did not allow the dollar to sustain its rise, and on Wednesday, the weak JOLTS report provoked its fall. And what do we now see on the charts? The price is smoothly moving up, and critical reports—ISM, NonFarm Payrolls, and unemployment are ahead. Forecasts for these reports are again quite high because the market still expects growth in indicators under the most possible hawkish Federal Reserve policy. At the same time, it notes the slowdown of the economy and labor market and expects the Fed to soften its policy—a paradox upon paradox.
EUR/USD on 5M Chart
In the 5-minute time frame on Wednesday, one trading signal for buying and one for selling were formed. Throughout the European session, the price stood still but eventually rebounded from the level of 1.1048 and rose to the level of 1.1091, from which it rebounded with perfect accuracy. Thus, novice traders could open long positions and then short ones. It was not possible to make money on the second transaction since the price did not continue to fall for long, but the first one brought profit.
How to Trade on Thursday:
In the hourly time frame, the EUR/USD pair has settled below the ascending trend line and, for the first time in a long while, has a chance to form a downward trend that would be logical and consistent with all factors and types of analysis. Unfortunately, illogical dollar sales could quickly resume after a downward correction, as no one knows how long the market will continue to price in the Federal Reserve's monetary policy easing, which has yet to start. However, the fact remains that the market continues to price in nearly all future Fed rate cuts, and the macroeconomic data from the US more often disappoint than please.
On Thursday, novice traders might again expect a decline as the price rebounded from the level of 1.1091. However, counting on a significant drop in the pair is probably unwise.
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, 1.1191, 1.1275-1.1292. On Thursday in the Eurozone, a retail sales report is scheduled, and in the US—important labor market data from ADP and the ISM Services PMI.
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 15 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.
