Analysis of Monday's Trades
1H Chart of EUR/USD
On Monday, the EUR/USD currency pair finally began to show signs of an upward correction. However, the day began with another decline for the euro, which was somewhat unexpected. While the drop wasn't particularly significant, it represented yet another decline for the European currency. In the latter half of the day, the quotes began to rise, but the initial resistance level halted the pair's upward movement.
Considering that the euro has been declining for four consecutive months and that we have already reached the key target area highlighted for 2024, it seems like a reasonable time for a correction. However, this entirely depends on the market dynamics. If there are no buyers for the euro, the correction is unlikely to start, no matter how overdue it may be. Interestingly, there were no local catalysts for either the rise or fall of the pair yesterday, as the macroeconomic and fundamental events calendar was almost empty.
5M Chart of EUR/USD
On the 5-minute timeframe on Monday, two sell signals were generated. The price first broke below the 1.0223 level and then rebounded off it from below. In both instances, the pair failed to reach the nearest target level, meaning both trades could have been closed at breakeven using a Stop Loss. Overnight into Tuesday, the price rose sharply for no apparent reason but then rebounded from the 1.0269-1.0277 range. This suggests that we may see a decline in the euro today.
Trading Strategy for Tuesday:
On the hourly timeframe, the EUR/USD pair remains in a downtrend. We believe that the euro's decline has resumed in the medium term, with only a short distance left to reach parity. Further declines in the euro are likely, as the fundamental and macroeconomic backdrop continues to support the U.S. dollar.
On Tuesday, price movements may be relatively muted, but it is important to remember that the downtrend, including the localized trend over the last three months, remains intact. The market continues to sell the pair, even in the absence of significant U.S. labor market and unemployment reports.
On the 5-minute timeframe, consider the following key levels: 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. The only significant event on Tuesday will be the release of the U.S. Producer Price Index. While we do not consider this report to be particularly important, the market is currently prepared to trade actively, even on days without scheduled news.
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 Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.
Forex trading beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are essential for long-term trading success.
