Trade Analysis of Thursday:
1H Chart of the EUR/USD Pair
On Thursday, the EUR/USD currency pair began a weak upward correction that only weakly resembles an actual correction. The technical picture now looks more like a temporary pause before a new decline. The euro cannot recover under any circumstances, as the market continues to move in an illogical way and simply ignores most macroeconomic and fundamental events. The culmination was yesterday's report on U.S. GDP for the first quarter, which exceeded forecasts, but... prompted a decline in the U.S. dollar. Thus, we are once again convinced that there is no correlation between news and the pair's movements at the moment. It is worth remembering that two weeks ago, the European Central Bank carried out a monetary policy tightening, which the market did not react to at all. Then we saw weekly growth in the dollar based solely on expectations from Federal Reserve representatives for a rate hike by the end of the year. The factor of the conclusion of the geopolitical conflict in the Middle East was also not taken into account by the market.
5M Chart of the EUR/USD Pair
On the 5-minute timeframe, three trading signals were formed on Thursday, none of which yielded profit for traders. The price changed direction throughout the day, paying no attention to technical levels. Thus, novice traders could have acted on the first two signals, and afterward, it would have been advisable to cease trading.
How to Trade on Friday:
On the hourly timeframe, the downward trend continues, despite the breach of the trend line last week. As the deal between Iran and the U.S. is signed, the market has one less reason to buy the American currency. However, the market pays no attention to this fact and generally ignores almost all factors in favor of the euro. Thus, the current strengthening of the American currency lacks concrete reasons.
On Friday, novice traders may open short positions with targets of 1.1275-1.1292 if the price consolidates below the 1.1354-1.1363 area. Long positions can be opened targeting 1.1413 if the price solidifies above the 1.1354-1.1363 area. However, volatility may again be low, a factor to take into account.
On the 5-minute timeframe, the levels to consider are 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, and 1.1830-1.1837. There are no significant events or reports scheduled in the Eurozone on Friday, while the U.S. will release only the University of Michigan consumer sentiment index, which is unlikely to provoke a strong, logical market reaction.
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.
