Trade Analysis for Tuesday:
1H Chart of the EUR/USD Pair
The EUR/USD currency pair once again failed to develop an upward impulse and surpass the level of 1.1432 during Tuesday's trading. Thus, the euro remains "at the bottom" and cannot change this situation. Yesterday, the report on German inflation posed certain challenges for the euro. Although the market ignored it, it nonetheless concluded that the European Central Bank's stance could soften significantly if inflation in the Eurozone continues to decline. In Germany, inflation has already dropped to 2.3%. This does not mean that Eurozone inflation will also fall. The report for June will be released today. However, the probability of a decline does exist. Yet, the issue with the euro is clearly not rooted in the ECB's monetary policy. The ECB has already raised key rates, which the market simply overlooked. It is also not related to geopolitics. Iran and the US have ceased active hostilities, the Strait of Hormuz is open, and oil prices have significantly decreased. The problem with the euro lies in a market that ignores many factors and shies away from buying euros.
5M Chart of the EUR/USD Pair
On the 5-minute timeframe on Tuesday, no trading signals were formed. By the end of yesterday, a new range of 1.1420-1.1432 was established. Therefore, there were no grounds for market entry for novice traders yesterday.
How to Trade on Wednesday:
On the hourly timeframe, the downward trend continues, despite the breakout of the trend line. Since the deal between Iran and the US has been signed, the market has one less reason to buy the US dollar. However, the market pays no attention to this fact and generally ignores almost all factors in favor of the euro. Thus, the current strengthening of the dollar lacks clear and understandable reasons.
On Wednesday, novice traders can consider opening short positions targeting 1.1354-1.1363 if the price bounces from the 1.1420-1.1432 area. Long positions can be opened targeting 1.1527-1.1531 if the price surpasses the 1.1420-1.1432 area.
On the 5-minute timeframe, the following levels should be considered: 1.1292, 1.1354-1.1363, 1.1420-1.1432, 1.1527-1.1531, 1.1584-1.1594, 1.1655-1.1666, 1.1745-1.1754, and 1.1830-1.1837. On Wednesday, an important inflation report will be released in the Eurozone, along with a speech from Christine Lagarde. In the US, relatively important ADP labor market reports and the ISM manufacturing index will be published, as well as a speech from Kevin Warsh, head of the Federal Reserve, to whom all market attention is currently directed...
Basic Rules of the Trading System:
- The strength of a signal is determined by the time it takes to form (a bounce or a 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 key to long-term success in trading.
