Friday Trade Review:
1H Chart of EUR/USD
On Friday, the EUR/USD currency pair continued to trade very weakly. Recall that for most of the past week, there was virtually no macroeconomic background, and the market saw no need to pay attention to fundamental events. On Friday, at least five reports of some significance were published. Yes, German retail sales and unemployment figures were quite "bland," and in any case, these pertain only to one country in the EU. However, for example, inflation in Germany is a fairly significant indicator that can influence eurozone-wide inflation. But as already noted, the market essentially ignored this data. It only responded to the US consumer sentiment index, which fell again, contrary to forecasts. This report triggered the rise in the pair during the US session, fully aligning with our expectations and projections. As before, we expect further depreciation of the US dollar.
5M Chart of EUR/USD
On the 5-minute chart on Friday, two trading signals were generated. The price twice bounced off the 1.1655–1.1666 area, which we have highlighted many times. Thus, novice traders could have opened long positions twice. In the first case, the price moved up no more than 20 pips, which was just enough to set a Stop Loss at breakeven. In the second case, the upward move was stronger, and in any event, the trade should have been closed manually before the weekend. This trade could have yielded a profit of approximately 25 pips.
How to Trade on Monday:
On the hourly timeframe, the EUR/USD pair has every chance to resume the uptrend that has been forming since the start of the year. The fundamental and macroeconomic background remains negative for the US dollar; however, over the past two weeks, the market has been moving almost sideways. In our view, as before, the US currency can only count on technical corrections.
On Monday, the EUR/USD pair may still trade with low volatility, as there are again very few important events scheduled. A break above the 1.1655–1.1666 area allows traders to expect growth towards the 1.1740 target. A consolidation back below the 1.1655–1.1666 area will once again enable considering shorts towards 1.1571.
On the 5-minute chart, focus on the following levels: 1.1198–1.1218, 1.1267–1.1292, 1.1354–1.1363, 1.1413, 1.1455–1.1474, 1.1527, 1.1552–1.1563–1.1571, 1.1655–1.1666, 1.1740–1.1745, 1.1808, 1.1851, 1.1908.
On Monday, the only significant event is Christine Lagarde's evening speech. We do not expect her to deliver any important information for the market before the new eurozone inflation report is published, so any significant market-relevant comments are unlikely before Tuesday.
Core Trading System Rules:
- Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
- False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
- Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
- Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
- MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
- Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
- Stop Loss: Set a Stop Loss to breakeven after the price moves 15 pips in the desired direction.
Key Chart Elements:
Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.
Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.
MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.
Important Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.
Forex trading beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are essential for long-term trading success.
