Analyzing Tuesday’s trades:
EUR/USD on 1H chart
EUR/USD continued to correct higher on Tuesday. The euro strengthened throughout the day, however, circumstances played a significant role. We did not expect the European PMI data to turn out positive while the US reports would falter. In Germany and the European Union, they were not conclusive, as manufacturing sectors remained below the 50.0 level, and in the European Union, business activity in this sector even declined. However, there was a solid increase in the services sectors. In America, both S&P indices were disappointing, which exerted pressure on the US dollar.
However, from a technical perspective, nothing has changed. The pair is gradually rising, as it hovers around the upper channel line, so today, it may lean towards a downward movement.
EUR/USD on 5M chart
Not the best trading signals on the 5-minute timeframe. This was due to the economic reports, as the pair rose after their release. Initially, the pair bounced from the level of 1.0678, then it bounced again, and surpassed this level. However, the pair only managed to show an upward movement when the reports weighed on the dollar. Therefore, the signals were somewhat “awkward,” and novice traders could not gain profit.
Trading tips on Wednesday:
On the hourly chart, the downtrend persists, but the EUR/USD pair is currently correcting higher. We believe that the euro should fall further, as it is still too high, and in general, the trend is headed downwards. However, at the moment, the market is likely taking a break before it starts a new downward movement.
Today, the pair may fall as it is currently near the upper boundary of the channel. The only thing that could hinder it is the US report on durable goods orders, which will be released at the beginning of the US session. If this report also turns out to be weak, the euro may rise further, but its medium-term prospects will not change.
The key levels on the 5M chart are 1.0483, 1.0526, 1.0568, 1.0611, 1.0678, 1.0725, 1.0785-1.0797, 1.0838-1.0856, 1.0888-1.0896, 1.0940, 1.0971-1.0981. On Wednesday, the IFO Business Climate Index will be published in Germany, and the US will release a report on orders for durable goods. The US report could influence the pair’s movement.
Basic trading rules:
1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, after which all open trades should be manually closed.
5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trendline or trend channel.
6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
How to read charts:
Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.
Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.
The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.
Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.
Beginning traders should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.
The material has been provided by InstaForex Company – www.instaforex.com
