Analyzing Wednesday's trades:
EUR/USD on 1H chart
EUR/USD continued to correct higher on Wednesday. The downtrend is still intact, as shown by the descending trend line. However, the euro had a few reasons to rise over the past two days. On Tuesday, the market simply ignored the JOLTs report on job openings in the US, which turned out to be stronger than expected. Yesterday, traders ignored the EU inflation data (which fell more than expected), as well as the ADP report (the values of which exceeded expectations both in February and March). Instead, the only "relatively negative" ISM Services PMI mounted pressure on the dollar. Therefore, there's hardly any logic in the pair's movements over the past two days. Perhaps it was necessary for the pair to start a correction, but in general, once again the euro is rising for no apparent reason.
EUR/USD on 5M chart
In the 5-minute timeframe, two trading signals were formed around the area of 1.0785-1.0797. Initially, the price rebounded from this area, but this turned out to be a false signal and resulted in losses. Afterwards, the price surpassed the 1.0785-1.0797 area and reached the level of 1.0838 by the end of the day. Therefore, traders could earn profit from the long position. Unfortunately, overall, the profit for the day was not high, but at least the pair showed logical movements. Ideally, a new downward movement should have started from the level of 1.0785.
Trading tips on Thursday:
On the hourly chart, the downtrend persists, but EUR/USD has been showing a corrective phase for the past two days. We believe that the euro should fall, as the price is still too high, and the global trend is downward. Unfortunately, the market doesn't always want to trade the pair in a logical manner, and occasionally, it exhibits unreasonable growth.
Today, it may be best to attempt trading bearish again, looking for selling signals near the trend line and in the area of 1.0838-1.0856. If the price breaches the trend line, the downtrend will be broken, but the pair may initially fall before it continues to rise.
The key levels on the 5M chart are 1.0568, 1.0611-1.0618, 1.0668, 1.0725, 1.0785-1.0797, 1.0838-1.0856, 1.0888-1.0896, 1.0940, 1.0971-1.0981, 1.1011, 1.1043, 1.1091. On Thursday, the EU will publish the second estimate of the Services PMI data, while the US will also release a minor report on initial jobless claims. We expect low volatility today.
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.
