Trade Analysis for Wednesday:
1H chart of the EUR/USD pair
The EUR/USD currency pair made a desperate attempt on Wednesday to start an upward correction, but it failed spectacularly. The market did not switch to buying the European currency and selling the dollar even after John Williams of the Federal Reserve said there was no need to rush to raise the key rate, even after market expectations for Fed tightening in 2026 became much weaker, even after the US PCE index showed no growth in August, even after inflation in Germany accelerated immediately to 3.3%, which significantly increases the likelihood of a third European Central Bank tightening. Instead, the market once again saw a positive second-quarter GDP report of 2.2% year-on-year versus forecasts of 1.5–1.6%. Once again, one report argued for the dollar and four argued against it. But the market chose the event that told it to buy the dollar. And that is all you need to know about the pattern of monthly growth of the US currency. The descending trendline is broken, but this absolutely does not mean that the downtrend is over. The market is now ignoring absolutely any factors.
5M chart of the EUR/USD pair
On the 5-minute TF, one sell signal formed on Tuesday and may develop today. Price bounced off the resistance area 1.1366–1.1377, giving novice traders an opportunity to open short positions. Today the pair's decline may continue.
How to Trade on Thursday:
On the hourly timeframe, EUR/USD continues its downward trend, which is now a full-fledged trend. Considering the events of recent months, we do not believe the European currency should plummet like a stone. But the market continues to buy the US dollar, ignoring any events and publications.
On Wednesday, novice traders can remain in short positions with a target of 1.1267–1.1275, since the price bounced off the 1.1366–1.1377 area. Open buy trades targeting 1.1461–1.1474 if price consolidates above 1.1366–1.1377.
On the 5-minute TF, 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 Thursday, the EU will publish an unemployment report, and Christine Lagarde will give another speech. In the US today, the ISM manufacturing activity index and the initial jobless claims report will be released. We believe the ISM index deserves close attention.
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.
