Analysis of Macroeconomic Reports:
There are no macroeconomic reports scheduled for Monday. However, this does not mean the market will remain flat all day. Friday was filled with events and data, and some traders will likely continue to react to them on Monday. In our view, the positive outlook for the dollar that we had seen in recent weeks has collapsed. A new upward trend may begin for both currency pairs. Of course, this is a hypothesis that still needs confirmation from technical factors and the overall picture.
Analysis of Fundamental Events:
There are absolutely no fundamental events to highlight on Monday, but the market is now confident that the Federal Reserve will cut the key interest rate in September—possibly even during the final two meetings of 2025 as well. Thus, there are currently plenty of reasons for the U.S. dollar to decline.
The trade war remains the market's primary concern, having shifted in form on Monday and taken on new momentum last Friday. We still believe that any trade agreements that maintain tariffs are merely a continuation of the trade war "under a different label." Deals like those signed with the European Union or Japan are, of course, beneficial to the U.S. Therefore, each new similar deal could trigger short-term strength in the U.S. dollar. However, from a broader and fundamental perspective, the market will continue to factor in the new trade architecture and Donald Trump's protectionist policies. The U.S. president keeps introducing new tariffs and increasing existing ones to extract payments from countries worldwide. The way the U.S. economy is responding has already become clear last week. GDP may continue to grow, but the rest of the macroeconomic indicators likely will not.
Conclusions:
During the first trading day of the week, both currency pairs may continue the rally that began on Friday. From our perspective, the dollar faced so many setbacks on Friday that it could fuel a full week of weakening. Technical levels may perform poorly on Monday, as the market is currently in a highly emotional state.
Key Rules for the Trading System:
- Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
- False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
- Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
- Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
- MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
- Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
- Stop Loss: Set a Stop Loss to breakeven after the price moves 15–20 pips in the desired direction.
Key Chart Elements:
Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.
Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.
MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.
Important speeches and reports, which are consistently featured in the news calendar, can significantly influence the movement of a currency pair. Therefore, during their release, it is advisable to trade with caution or consider exiting the market to avoid potential sharp price reversals against the prior trend.
Beginners in the Forex market should understand that not every transaction will be profitable. Developing a clear trading strategy and practicing effective money management are crucial for achieving long-term success in trading.
