Analysis of Macroeconomic Reports:
There are quite a few macroeconomic events scheduled for Thursday. The Eurozone will publish a report on retail sales, the UK will release a business activity index in the construction sector, and the US will publish an important ADP report on the number of jobs created (comparable to NonFarm Payrolls) and the ISM business activity index in the services sector. In addition, the US will also release reports on the number of initial applications for unemployment benefits and the standard S&P business activity index in the services sector. Traders should pay special attention to the ADP and ISM reports.
Analysis of Fundamental Events:
Thursday's only notable fundamental event is a speech by European Central Bank Monetary Committee member Tuominen. However, the market could already clearly understand what to expect from the ECB in September. We believe another rate cut is very likely. The market has not yet factored in this information, so a new speech by the ECB representative is unlikely to change the market's perception. The market focuses only on US economic reports and adjusts its expectations for the Federal Reserve rate.
General Conclusions:
On Thursday, both currency pairs may continue to retreat, but only as part of a correction against an upward trend. The euro has breached the ascending trend line, so it may continue to move down more likely than the pound, which is still very reluctant to fall. However, today and tomorrow, everything will depend on US data on the labor market, unemployment, and ISM business activity in the services sector.
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 15-20 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.
