Review of Macroeconomic Reports
Quite a large number of macroeconomic publications are scheduled for Tuesday, but almost all of them are of no real importance. In Germany, the European Union, the United Kingdom, and the United States, second estimates of the December S&P business activity indices will be released. Second estimates rarely differ from the first ones, and in the United States hardly anyone pays attention to the S&P indices at all. The ISM indices are much more important for traders.
Germany's inflation report could attract traders' attention if not for its recent readings. Both in Germany and in the European Union, the consumer price index has been hovering steadily around the 2% level, which the ECB considers its target. Therefore, inflation currently has no impact on the ECB's monetary policy.
Review of Fundamental Events
Several fundamental events are scheduled for Tuesday, but they are secondary in nature. For example, Fed representative Thomas Barkin is scheduled to deliver a speech in the United States. However, let us recall that changes in the tone of the Federal Reserve's Monetary Committee should be expected only after the release of December data on inflation, unemployment, and the labor market. For now, the Fed is inclined to pause in January.
The market also has a topical issue at the moment—the arrest of Nicolas Maduro and Trump's plans to "restore order" in Greenland and Cuba. Overall, we saw the market's reaction to these events and plans last night. The US dollar rose slightly, but then collapsed, because even heightened geopolitical tension in Latin America is currently unable to force traders to buy the dollar.
General Conclusions
During the second trading day of the week, both currency pairs may continue to rise. Throughout the entire current week, the dollar is likely to struggle due to a large amount of macroeconomic data that is dangerous for it, and Monday already showed that these concerns are not unfounded. For the euro, traders have an excellent trading area at 1.1745–1.1754, while for the pound it is the 1.3529–1.3543 level.
Basic Rules of the Trading System
- The strength of a signal is determined by the time it took to form (a bounce or a breakout). The less time it takes, the stronger the signal.
- If two or more trades were opened near a level based on false signals, all subsequent signals from that level should be ignored.
- In a flat market, any pair may generate many false signals—or none at all. In any case, at the first signs of a flat, it is better to stop trading.
- Trades are opened during the time period from the start of the European session until the middle of the US session, after which all trades should be closed manually.
- On the hourly timeframe, MACD signals should preferably be traded only when there is good volatility and a trend confirmed by a trend line or trend channel.
- If two levels are located too close to each other (5 to 20 points apart), they should be treated as a support or resistance zone.
- After the price moves 15–20 points in the correct direction, the Stop Loss should be moved to breakeven.
What Is Shown on the Charts
- Price support and resistance levels are the levels that serve as targets when opening buy or sell positions. Take Profit levels can be placed near them.
- Red lines are channels or trend lines that show the current trend and indicate the preferred trading direction.
- The MACD indicator (14,22,3)—histogram and signal line—is an auxiliary indicator that can also be used as a source of signals.
Important speeches and reports (always listed in the economic calendar) can have a strong impact on currency pair movements. Therefore, during their release, trading should be conducted with maximum caution, or traders should exit the market to avoid sharp price reversals against the preceding move.
Beginner forex traders should remember that not every trade can be profitable. Developing a clear strategy and proper money management are the keys to long-term success in trading.
