Friday's Trade Analysis:
1H Chart of the EUR/USD Pair
The EUR/USD currency pair slightly recovered during trading on Friday, but the growth of the European currency does not allow for any greater expectations. Unfortunately, the euro suffered another setback last week. Although an upward trend is maintained on the higher timeframes, the euro cannot establish a new trend on the hourly timeframe. Last week, the Federal Reserve adopted a more "hawkish" stance than the market had expected, leading to a sharp rise in the dollar. The week before, the market simply ignored the European Central Bank's rate hike. The deal between Iran and the U.S. did not exert any pressure on the dollar, and yet another breach of the ceasefire in the Middle East, another potential disruption of negotiations, and the renewed threat of escalation of the conflict worked in favor of the American currency once again. In other words, the market essentially ignored all the news supporting the euro and responded to all events that supported the dollar. This is why we previously discussed the illogical strengthening of the dollar last week. The dollar's growth should have already concluded by now. On Friday, there were no significant macroeconomic events. The downward trend on the hourly timeframe continues.
5M Chart of the EUR/USD Pair
On the 5-minute timeframe, no trading signals were formed on Friday. Overnight, the price consolidated below the 1.1455-1.1474 area, but by the time the European trading session opened, it had moved a considerable distance away from the signal formation point. Therefore, it was too late to enter a trade. The pair then returned to the 1.1455-1.1474 range and traded within it for the rest of the day.
How to Trade on Monday:
On the hourly timeframe, the downward trend has resumed. Since the deal between Iran and the U.S. was signed, the market has one less reason to buy the U.S. dollar. However, the deal can fall apart at any moment, as Israel and Lebanon continue to attack each other, and the market is ignoring factors in favor of the euro.
On Monday, novice traders can open short positions with a target of 1.1413 if the price consolidates below the 1.1455-1.1474 area. Long positions can be opened with targets of 1.1527-1.1531 if the price consolidates above the 1.1455-1.1474 area.
On the 5-minute timeframe, the following levels should be considered: 1.1292, 1.1354-1.1363, 1.1413, 1.1455-1.1474, 1.1527-1.1531, 1.1584-1.1594, 1.1655-1.1666, 1.1745-1.1754, 1.1830-1.1837. On Monday, ECB President Christine Lagarde will deliver a speech in the European Union, and that is the only event of the day. We do not believe that Lagarde will announce anything significant a week and a half after the ECB meeting.
Basic Rules of the Trading System:
- The strength of a signal is determined by the time it takes to form (a bounce or a breakout). The less time it took, the stronger the signal.
- If two or more trades were opened at a particular level on false signals, all subsequent signals from that level should be ignored.
- In a flat, any pair can form many false signals or none at all. Technical levels may be ignored.
- On the hourly timeframe, trading signals from the MACD indicator should be executed only when volatility is good, and a trend is confirmed by a trend line or channel.
- If two levels are too close together (5 to 20 pips), they should be considered a support or resistance area.
- After moving 15 pips in the correct direction, a Stop Loss should be placed at breakeven.
What's on the Charts:
Price levels (areas) of support and resistance are targets when opening long or short positions or sources of signals.
Red lines indicate channels or trend lines that display the current trend and indicate the preferred direction for trading.
The MACD indicator (14,22,3) – histogram and signal line – is a supplementary indicator that can also be used as a source of signals.
Important speeches and reports (contained in the news calendar) can significantly impact the movement of the currency pair. Therefore, during their release, trading should be conducted with maximum caution, or one should exit the market to avoid sharp reversals against preceding movements.
Beginners trading in the forex market should remember that not every trade can be profitable. Developing a clear strategy and practicing money management are key to long-term success in trading.
