Analysis of Macroeconomic Reports:
A few macroeconomic events are scheduled for Friday. The only noteworthy report is on retail sales in the UK. Over the past 6-7 days, the British pound has been rising due to market expectations regarding the Bank of England and the Federal Reserve's rate decisions, followed by the market's reaction to those decisions, and has even risen without any specific reasons. Therefore, the retail sales report will likely not impact the overall market sentiment. The pound may experience a pullback or correction, but the market's sentiment remains firmly bullish. There are no significant reports scheduled in the Eurozone or the U.S.
Analysis of Fundamental Events:
All the most important fundamental events of this week have already taken place. The market has once again shown and proven that the nature of fundamental events does not matter much. In each of them, it simply finds factors that work against the dollar while ignoring everything else. In principle, the market may now sell off the dollar in light of the emerging divergence between the Fed's rates and those of the BoE/European Central Bank. The market now expects the Fed to lower rates faster than the British or European central banks, which could trigger a new wave of selling. As the ECB meeting took place just last week, ECB President Christine Lagarde's speech scheduled for today is unlikely to provide the market with any new significant information.
General Conclusions:
During the last trading day of the week, both currency pairs are likely to trade very calmly. The overall market sentiment suggests that both pairs could continue rising even today. At the same time, they could also correct. Therefore, it is best to trade based on technical levels, formations, and patterns. No one knows how long major players will continue selling off the U.S. dollar or how much longer they will be pricing in the Fed's monetary easing.
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 were opened around any level due to 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 good volatility and a 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 a support or resistance area.
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 around them.
Red lines: channels or trend lines that depict the current trend and indicate the preferred trading direction.
The MACD indicator (14,22,3): 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 avoid sharp price reversals against the prevailing movement.
For beginners, it's important to remember that not every trade will yield profit. Developing a clear strategy and effective money management is key to success in trading over the long term.
