Tuesday's Trade Analysis:
1H Chart of EUR/USD
The EUR/USD currency pair continued its upward movement on Tuesday, as the impact of geopolitical factors on market sentiment waned. New traders should note that over the past week and a half, the only positive event has been the temporary ceasefire in the Middle East, which will last another week. Meanwhile, the Strait of Hormuz remains blocked, with high oil and gas prices, and hostilities could resume at any moment as Iran has not abandoned its nuclear weapons. Donald Trump stated last night that the war in Iran is over, but did not provide any comments regarding this. In our opinion, this is indeed the best development: simply end the war and then engage in negotiations. However, this information came only last night, and before then, the pair had been rising for a week and a half. Thus, we believe the market is gradually returning to its usual trading mode, in which the economy and fundamentals determine price movements.
5M Chart of EUR/USD
On the 5-minute timeframe, two buying signals were formed on Tuesday. During the Asian trading session, the pair rebounded twice from the area of 1.1745-1.1755, and at the opening of the European session, it had only moved a few pips away from the signal formation point. Therefore, novice traders could confidently open long positions. Throughout the day, the pair moved in only one direction, so longs clearly yielded profits.
How to Trade on Wednesday:
On the hourly timeframe, the upward trend remains intact and is even gaining momentum. After two months of relentless dollar growth driven solely by geopolitical factors, the market seems to have concluded that this cannot continue indefinitely. For the second consecutive week, the market has effectively ignored the geopolitical background. Therefore, traders may again focus on the economy and Trump's policies, and the U.S. dollar has few advantages in this regard.
On Wednesday, novice traders may consider short positions if the price consolidates below the 1.1745-1.1754 range, targeting 1.1655-1.1666. The buy signals from yesterday allow holding long positions with a target of 1.1830-1.1837.
On the 5-minute timeframe, levels to consider are 1.1354-1.1363, 1.1413, 1.1455-1.1474, 1.1527-1.1531, 1.1584-1.1591, 1.1655-1.1666, 1.1745-1.1754, 1.1830-1.1837, and 1.1899-1.1908. On Wednesday, a report on industrial production will be published in the European Union, and Christine Lagarde will give a speech. In the U.S., the calendar has no significant events.
Key Principles of the Trading System:
- The strength of the signal is determined by the time it took to form the signal (bounce or level breakthrough). The shorter the time, the stronger the signal.
- If two or more trades were opened around any level based on false signals, all subsequent signals from that level should be ignored.
- In a range, any pair can generate a lot of false signals or may not generate them at all. Technical levels may be ignored.
- On the hourly timeframe, it is advisable to trade MACD signals only when volatility is good, and the trend is confirmed by a trendline or trend channel.
- If two levels are located too close together (5-20 pips apart), they should be considered a support or resistance area.
- After moving 15 pips in the correct direction, a Stop Loss should be set to breakeven.
What to Look for on the Charts:
Price levels of support and resistance are levels that serve as targets when opening buys or sells. Take Profit levels can be placed around them.
Red lines represent channels or trend lines that show the current trend and indicate the direction in which it is preferable to trade now.
The MACD indicator (14,22,3) – the histogram and the signal line – is a supporting indicator that can also be used as a source of signals.
Important speeches and reports (always included in the news calendar) can significantly affect the movement of the currency pair. Therefore, during their release, trading should be done with utmost caution, or traders should exit the market to avoid sharp price reversals against the previous movement.
Beginning traders in the forex market should remember that not every trade can be profitable. Developing a clear strategy and effective money management are the keys to long-term trading success.
