Analysis of Tuesday's Trades:
1H Chart of the EUR/USD Pair
The EUR/USD currency pair continued to trade within a sideways channel, as shown on the hourly chart. Traders still cannot find grounds to buy or sell the pair. The macroeconomic backdrop is largely ignored, the fundamentals have little significance, and the market is awaiting important geopolitical news and events rather than more threats, ultimatums, and promises. As a result, news is coming in almost daily, but the movements have been absent for three weeks. Just yesterday, an inflation report was released in the Eurozone, with the core indicator being higher than forecasts. Thus, the likelihood of an European Central Bank rate hike in June increased, which should have supported the euro. However, we did not see any growth. The same applies to the US JOLTs report. If there is any market reaction, it has no impact—flat trading persists.
5M Chart of the EUR/USD Pair
On the 5-minute timeframe, two trading signals were generated on Tuesday, and the market woke up a bit closer to the evening, showing a small decline of 20 pips. These 20 pips could be earned by novice traders, which is quite a good profit given the current circumstances.
How to Trade on Wednesday:
On the hourly timeframe, the euro has been in correction for a month and has been flat for three weeks. The US dollar has resumed its rise amid the conflict in the Middle East, which is on the brink of escalation, but we still do not expect prolonged strength for the American currency. The market continues to largely ignore fundamentals and macroeconomics, while selectively reacting to geopolitical issues.
On Wednesday, novice traders can open short positions targeting 1.1584-1.1591 if the price bounces again from the 1.1655-1.1666 area. New long positions can be considered if the price bounces from the 1.1584-1.1591 area, targeting 1.1655-1.1666.
On the 5-minute timeframe, consider the following levels: 1.1354-1.1363, 1.1413, 1.1455-1.1474, 1.1527-1.1531, 1.1584-1.1591, 1.1655-1.1666, 1.1745-1.1754, 1.1830-1.1837, 1.1899-1.1908. Among the more or less significant events on Wednesday, we can highlight the ADP report on employment changes in the US private sector and the ISM Services Activity Index. However, the first two days of the week have shown that the market continues to ignore macroeconomic data.
Basic Rules of the Trading System:
- The strength of a signal is determined by the time it takes to form (bounce or breakout). The less time it took, the stronger the signal.
- If two or more trades were opened at a particular level on false signals, all subsequent signals from that level should be ignored.
- In a flat, any pair can form many false signals or none at all. Technical levels may be ignored.
- On the hourly timeframe, trading signals from the MACD indicator should be executed only when volatility is good, and a trend is confirmed by a trend line or channel.
- If two levels are too close together (5 to 20 pips), they should be considered a support or resistance area.
- After moving 15 pips in the correct direction, a Stop Loss should be placed at breakeven.
What's on the Charts:
Price levels (areas) of support and resistance are targets when opening long or short positions or sources of signals.
Red lines indicate channels or trend lines that display the current trend and indicate the preferred direction for trading.
The MACD indicator (14,22,3) – histogram and signal line – is a supplementary indicator that can also be used as a source of signals.
Important speeches and reports (contained in the news calendar) can significantly impact the movement of the currency pair. Therefore, during their release, trading should be conducted with maximum caution, or one should exit the market to avoid sharp reversals against preceding movements.
Beginners trading in the forex market should remember that not every trade can be profitable. Developing a clear strategy and practicing money management are keys to success in trading over the long term.
