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Analysis of Tuesday’s deals:
30M chart of the EUR/USD pair
The EUR/USD currency pair continued to swing on Tuesday. While an upward bias prevailed in the previous few days, the pair went down quite a lot on Tuesday. However, this is exactly what “swinging” means. Therefore, we have not seen anything new today. The pair was growing within a limited range for several days, but today it fell. All movements within the range can be called groundless, if we take into account the fundamental and macroeconomic background. Only European Central Bank President Christine Lagarde’s speech at the economic summit took place today, where she once again repeated that the ECB is ready to raise rates by 0.25% in July. This message sounds like a mockery, since the ECB rate is currently negative. Thus, an increase of 0.25% will have practically no effect on the inflation that continues to grow in the European Union, for the sake of reducing which the central bank, in fact, is going to tighten monetary policy. The market already had enough opportunities to work out the future rate hike, but, as we can see, the euro is not growing even on this information. Consequently, traders are still unwilling to deal with risky currencies like the euro or the pound.
5M chart of the EUR/USD pair
The technical picture does not look the best, but not the worst either on the 5-minute timeframe. The pair spent the first half of the day between the levels of 1.0582 and 1.0607. Several trading signals for a rebound were formed. The first of them should not have been worked out, since the price was already near the level of 1.0607 at the time of its formation. The second sell signal could have been worked out. The price dropped back to the level of 1.0582, which allowed the beginners to earn up to 10 points. This was followed by a new bounce from 1.0582, but this signal for longs was false. It was not even possible to set Stop Loss to breakeven on it, so we received a small loss. The pair then formed the strongest signal of the day when it broke the 1.0582 level. After that, it went down at a high of 65 points, and novice traders had to close the short position in the late afternoon. Toward evening, the price rolled back a bit, so only 40 points were earned.
How to trade on Wednesday:
The movement remains absolutely incomprehensible on the 30-minute timeframe. There is a minimum upward slope, but this does not make it easier for traders. We still characterize such a movement as a “swing”. Novice traders should take into account this nature of the movement and approach each signal as carefully as possible. On the 5-minute TF on Wednesday, it is recommended to trade at the levels of 1.0465, 1.0483, 1.0582, 1.0607, 1.0636, 1.0663, 1.0697. When passing 15 points in the right direction, you should set Stop Loss to breakeven. Lagarde will deliver a new speech on Wednesday, and we will also hear from Federal Reserve Chairman Jerome Powell. The market may react to these events, but it is unlikely to happen. Only if both chapters do not repeat those theses that have long been known to the market. A report on GDP for the first quarter in the third assessment will also be released in the US. We also do not expect traders to significantly react to it.
Basic rules of the trading system:
1) The signal strength is calculated by the time it took to form the signal (bounce or overcome the level). The less time it took, the stronger the signal.
2) If two or more deals were opened near a certain level based on false signals (which did not trigger Take Profit or the nearest target level), then all subsequent signals from this level should be ignored.
3) In a flat, any pair can form a lot of false signals or not form them at all. But in any case, at the first signs of a flat, it is better to stop trading.
4) Trade deals are opened in the time period between the beginning of the European session and until the middle of the American one, when all deals must be closed manually.
5) On the 30-minute TF, using signals from the MACD indicator, you can trade only if there is good volatility and a trend, which is confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 points), then they should be considered as an area of support or resistance.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14,22,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important speeches and reports (always contained in the news calendar) can greatly influence the movement of a currency pair. Therefore, during their exit, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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