Analyzing Wednesday's trades:
EUR/USD on 1H chart
The EUR/USD currency pair continued its upward movement on Wednesday. Initially, no significant macroeconomic events were on the calendar except for the FOMC minutes. However, a new report appeared in the morning—the annual adjustment of Non-Farm Payrolls. It turns out this indicator revises the number of jobs created over the past 12 months, starting from March. In other words, it updated the Non-Farm Payroll results from March 2023 to March 2024. The report came in below forecasts, and the market eagerly resumed selling the US dollar, which has been happening daily without breaks or pauses.
From a technical perspective, there is a clear uptrend in the hourly time frame, and no new insights can be provided on the macroeconomic or fundamental aspects. The euro continues to rise either on formal factors or even without them. The mere anticipation of dovish rhetoric from Powell drove the dollar down by 120 pips. The market's expectation of an interest rate cut by the Fed in September weighed on the dollar by 350 pips.
EUR/USD on 5M chart
Three trading signals were generated around the 1.1132 level on Wednesday in the 5-minute time frame. Initially, the price bounced off this level twice, but the signals duplicated each other, so traders could only open one short position. The dollar even had a real chance to test the 1.1091 level, but a new US labor market report triggered a new rise in the pair. A consolidation above the 1.1132 level could also have been traded, with the pair moving up several dozen pips before the FOMC minutes were released.
Trading tips on Thursday:
EUR/USD continues to form a new upward trend supported by a trend line in the hourly time frame. We believe the euro has fully factored in all the bullish factors, so we do not expect further upward movement. However, the market again shows it is ready to react to almost any event by panic selling the dollar. And if there are no events, it is prepared to sell the dollar for the sake of it. Therefore, expectations are expectations, but denying the current technical picture is impossible. A decline in the pair can be expected after the price consolidates below the trendline.
On Thursday, novice traders might expect a decline since the price cannot rise indefinitely. But for this to happen, there must be at least some sell signal.
The key levels to consider on the 5M time frame are 1.0726-1.0733, 1.0797-1.0804, 1.0838-1.0856, 1.0888-1.0896, 1.0940, 1.0971, 1.1011, 1.1048, 1.1091, 1.1132, 1.1184, 1.1275-1.1292. On Thursday, reports on business activity in the services and manufacturing sectors are scheduled for the Eurozone, Germany, and the US. Given the strong bullish sentiment in the market, it is unlikely these reports will have any significant impact.
Basic rules of the trading system:
1) The strength of a signal is determined by the time it takes for the signal to form (bounce or level breakthrough). The less time it took, the stronger the signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be ignored.
3) In a flat market, any currency pair can form multiple false signals or none at all. In any case, it's better to stop trading at the first signs of a flat market.
4) Trades should be opened between the start of the European session and midway through the U.S. session. After this period, all trades must be closed manually.
5) In the hourly time frame, trades based on MACD signals are only advisable amidst substantial volatility and an established trend confirmed by a trendline or trend channel.
6) If two levels are too close to each other (5 to 20 pips), they should be considered support or resistance.
7) After moving 20 pips in the intended direction, the Stop Loss should be set to break even.
What's on the charts:
Support and Resistance price levels: targets for opening long or short positions. You can place Take Profit levels near them.
Red lines: channels or trend lines that depict the current trend and indicate the preferred 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 source of signals.
Important speeches and reports (always noted in the news calendar) can profoundly influence the movement of a currency pair. 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.
Beginners should always remember that not every trade will yield profit. Developing a clear strategy and effective money management is key to success in trading over a long period.
