Tuesday Trade Analysis:
1H Chart of the EUR/USD Pair
The EUR/USD currency pair had an interesting and, most importantly, entertaining trading session on Tuesday. It was not just the movements of the euro or the dollar that were entertaining; the geopolitical backdrop was also quite lively. As we have pointed out many times, the geopolitical situation can change about five times a day. The market sometimes ignores certain news, but in other cases, traders cannot control their emotions, leading to market "swings." On Tuesday morning, Donald Trump once again stated that a deal with Iran is close to being signed, and by the evening, it became known that Iran had shot down an American helicopter patrolling the Strait of Hormuz. Shortly after, Trump stated that this act of aggression would not go unanswered. Essentially, this sums up what we need to know about Trump's deal, which has been "on the verge of being signed" for the past two months. It is not surprising that the dollar fell in the first half of the day and rose in the second. The downward trend persists, as there is no sign of a peace deal between Iran and the U.S. The market continues to ignore most fundamental and macroeconomic events.
5M Chart of the EUR/USD Pair
On the 5-minute timeframe on Tuesday, two buy trading signals were formed. During the Asian trading session, the pair bounced off the 1.1527-1.1531 area and rose toward 1.1584-1.1594. It fell just a few pips short of hitting that target. During the American session, the pair returned to the 1.1527-1.1531 area and bounced again.
How to Trade on Wednesday:
On the hourly timeframe, the range has ended, and the downward trend has resumed after three weeks of stagnation, but further growth of the American currency will depend entirely on developments in geopolitical events. Trump continues to promise that a deal with Iran will be finalized soon. If this happens, the dollar will start losing positions.
On Wednesday, novice traders may open short positions targeting 1.1455-1.1474 if the price breaks below the 1.1527-1.1531 area. Long positions can be considered on a bounce from the 1.1527-1.1531 area, with targets of 1.1584-1.1594.
On the 5-minute timeframe, levels to consider are 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, 1.1899-1.1908. On Wednesday, we can expect the U.S. May inflation report, but the fate of the EUR/USD pair will again be determined by geopolitics. For instance, the U.S. may deliver a "retaliation strike" for the downed helicopter today, which would signify another violation of the ceasefire and a potential collapse of negotiations.
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 keys to success in trading over the long term.
