Analysis of Macroeconomic Reports:
There are several macroeconomic reports scheduled for Thursday, May 21. However, the relevance of this number of reports may be minimal. Recall that this week the market has already ignored significant British reports on inflation and unemployment, so the indices of business activity in the service and manufacturing sectors for Germany, the Eurozone, the UK, and the U.S. for May may also be easily overlooked. The market continues to focus only on geopolitical news. Additionally, the U.S. will release reports on building permits and housing starts, but these data have even less chance of influencing the market.
Analysis of Fundamental Events:
Among the fundamental events on Thursday, speeches by representatives from the Bank of England (Taylor) and the European Central Bank (Elderson) are noteworthy. Market expectations regarding the Federal Reserve's monetary policy have become more "hawkish" recently, but it is currently a matter of whether there will be one tightening move closer to the end of the year. Expectations regarding the BoE's monetary policy have shifted 100%. Previously, the market was confident in a rate hike in June, but after the April inflation report, it is certain that the rate will be maintained next month. Thus, the ECB may tighten its policy in relative isolation. This is currently not helping the euro at all.
The geopolitical backdrop has become slightly more optimistic this week, but it is important to remember that new pessimistic data could emerge at any time. Negotiations between Washington and Tehran appear to have resumed and, according to the U.S. president, are "very successful." However, it should be noted that Trump has made claims about breakthroughs in negotiations before. This does not prevent him from threatening Iran with new missile strikes the very next day. No confirmations of diplomatic success have come from Iran. On the contrary, on Tuesday, official Tehran stated that if new attacks on Iran occur, the war would spill beyond the Middle East and become global.
General Conclusions:
During the penultimate trading day of the week, both currency pairs may trade quite sluggishly, but any geopolitical news could provoke a new storm in the market. The euro can be traded today from the areas of 1.1584-1.1591 and 1.1655-1.1666, while the British pound can be traded from the areas of 1.3380-1.3386 and 1.3456-1.3476. Geopolitics remains a key influencing factor in the currency market.
Main Rules of the Trading System:
- The strength of the signal is determined by the time it took to form the signal (bounce or breakout of the level). The less time it took, the stronger the signal.
- If two or more trades were opened near any level based on false signals, all subsequent signals from this level should be ignored.
- In a flat market, any pair can generate many false signals or none at all. Technical levels may be ignored.
- On the hourly timeframe, it is preferable to trade signals from the MACD indicator only in the presence of good volatility and a trend that is confirmed by a trend line or trend channel.
- If two levels are too close together (5-20 pips apart), treat them as a support or resistance zone.
- After a move of 15 pips in the right direction, a Stop Loss should be set to breakeven.
What is on the Charts:
Price levels (areas) of support and resistance – levels that are targets when opening purchases or sales, or sources of signals.
Red lines – channels or trend lines that display the current trend and indicate which direction is preferable to trade now.
MACD indicator (14, 22, 3) – histogram and signal line – a supporting indicator that can also be used as a source of signals.
Important speeches and reports (contained in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be done as cautiously as possible, or one should exit the market to avoid a sharp price reversal against the preceding movement.
Beginners trading in the Forex market should remember that not every trade can be profitable. Developing a clear strategy and sound money management are key to long-term trading success.
