Analysis of Thursday's Trades
1H Chart of EUR/USD
The EUR/USD currency pair displayed erratic movements on Thursday. It seems the market received some information but was uncertain about its implications or how to respond. Yesterday was particularly eventful regarding macroeconomic and fundamental developments, with three GDP reports, an unemployment report, the European Central Bank meeting, and Christine Lagarde's speech—all contributing to a stronger U.S. dollar.
Both European GDP reports revealed disappointing results, while the U.S. GDP report, though underwhelming, still indicated growth of 2.3%. The ECB meeting can be characterized as dovish, yet the euro managed to rise during the day before ultimately falling again. The ascending trendline was breached, and the price was unable to surpass the 1.0451 level. As a result, we expect another downward movement. While this may not signal the end of the overall upward correction, the dollar is likely to gain strength in the near future.
5M Chart of EUR/USD
On the 5-minute timeframe, two sell signals emerged around the 1.0433-1.0451 area on Thursday. These signals essentially mirrored each other, with the second appearing late in the evening. Therefore, novice traders could have opened short positions, but they would have needed to either close them immediately or carry them over to Friday. Currently, the trade is in profit.
Trading Strategy for Friday:
On the hourly timeframe, the EUR/USD pair remains in a medium-term downtrend, and the local uptrend has been reversed. As previously noted, we expect the euro to decline further, as current fundamental and macroeconomic conditions continue to support the U.S. dollar. Therefore, in the near future, we anticipate another wave of strengthening for the American currency.
On Friday, we expect the pair to decline further if the price remains below the 1.0433-1.0451 range. Today, new data from the EU will be released, which is unlikely to boost the euro.
On the 5-minute timeframe, the key levels to watch are 1.0156, 1.0221, 1.0269-1.0277, 1.0334-1.0359, 1.0433-1.0451, 1.0526, 1.0596, 1.0678, 1.0726-1.0733, 1.0797-1.0804, and 1.0845-1.0851. On Friday, Germany will publish reports on retail sales, inflation, and unemployment. While these reports are not the most critical, they provide insight into the state of the EU's leading economy. In the U.S., the core personal consumption expenditure (PCE) price index will also be released, but we do not consider this indicator to be of major significance.
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 speeches and reports, which are consistently featured in the news calendar, can significantly influence the movement of a currency pair. Therefore, during their release, it is advisable to trade with caution or consider exiting the market to avoid potential sharp price reversals against the prior trend.
Beginners in the Forex market should understand that not every transaction will be profitable. Developing a clear trading strategy and practicing effective money management are crucial for achieving long-term success in trading.
