Trade Review for Monday:
1H Chart of the EUR/USD Pair
The EUR/USD pair showed no interesting moves on Monday, and the macroeconomic and fundamental calendar was empty. Yet the euro still declined slightly. Thus, even on days that should be conducive to a correction, no correction occurs. The euro continues either to fall or, at best, to stand still. We believe traders have concluded the current move is not logical, and a fourth consecutive week of dollar gains is hardly explainable solely by Federal Reserve tightening or changing Fed views. With equal ease, one can now attribute any dollar rise to a hawkish Fed. Therefore, we continue to observe an inertial decline in the pair that can only be explained technically. The descending trend line remains in force, and the price cannot overcome it. The downtrend therefore remains intact.
5M Chart of the EUR/USD Pair
On the 5-minute timeframe on Monday, no trading signals were formed. Price traded sideways most of the day with a slight downward bias around the 1.1366–1.1377 area. During the day, it failed to close convincingly below that area or produce a clear rebound.
How to Trade on Tuesday:
On the hourly timeframe, EUR/USD continues a downward trend that is now a full-fledged trend. Given recent months' events, we do not believe the euro should be plunging like a stone. But for the market, the Fed's monetary policy remains the top priority and has become much more favorable to the US currency. The market ignores other factors.
On Tuesday, novice traders can open short positions with a target of 1.1267–1.1275 if price consolidates below the 1.1366–1.1377 area. Open long positions with a target of 1.1461–1.1474 if price closes above the 1.1366–1.1377 area.
On the 5-minute timeframe, consider the levels 1.1267–1.1275, 1.1366–1.1377, 1.1461–1.1474, 1.1527–1.1531, 1.1584–1.1594, 1.1655–1.1665, 1.1745–1.1754. On Tuesday, European Central Bank President Christine Lagarde will speak, and the US JOLTS vacancies report will be released as the first indicator of labour-market health. We don't expect either event to provoke a strong market reaction. Volatility may again be low today.
Key Rules of the Trading System:
- The strength of a signal is determined by the time it takes to form the signal (rebound or breakout). The less time taken, the stronger the signal.
- If two or more trades were opened at a certain level based on false signals, all subsequent signals from that level should be ignored.
- In a range (flat), any pair can generate many false signals or may not produce any at all. Technical levels may be disregarded.
- On the hourly timeframe, trading signals from the MACD indicator should be acted upon only when volatility is high, and a trend line or trend channel confirms the trend.
- If two levels are too close together (within 5-20 pips), treat them as a support or resistance area.
- After moving 15 pips in the right direction, a stop-loss should be set to break even.
What to Look for on the Charts:
Price levels (areas) of support and resistance serve as targets for opening buy or sell trades or as sources of signals.
Red lines indicate channels or trend lines that show the current trend and the preferred trading direction.
The MACD indicator (14,22,3) — the histogram and signal line — is an auxiliary indicator that can also provide signals.
Important speeches and reports (listed in the news calendar) can significantly influence currency pair movements. Therefore, during their release, traders should approach trading with utmost caution, or exit the market to avoid sudden reversals against the preceding move.
Beginner forex traders 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.
