14.10.202604:22 Forex Analysis & Reviews: What to Watch on October 14? Analysis of Fundamental Events for Beginners

Review of macroeconomic releases:

Very few macroeconomic releases are scheduled for Wednesday. Essentially, the only major item is the US Consumer Price Index, which matters for the Federal Reserve's next steps. Recall the Fed has been focused on fighting high inflation but is not prepared to raise the policy rate at every meeting. Inflation rising to 3.6% or higher could bring the central bank closer to a second monetary-policy tightening. In our view, the market has long priced in future Fed tightening, but the dollar has needed little to rally over the past month. Therefore, inflation higher than 3.6% could trigger further declines in the euro and the pound.

Review of fundamental events:

Among Wednesday's fundamental events are two speeches by European Central Bank President Christine Lagarde. The latest eurozone inflation report disappointed, accelerating to 3.8%, so the ECB still has a chance to deliver a third tightening this year. Unfortunately, even a hawkish Lagarde may do little for the euro: the market has ignored euro-positive factors for a month and has been buying only the dollar.

The geopolitical backdrop remains problematic. The US and Iran are not conducting official talks at this time, though Donald Trump continues to insist a deal could be signed after the US Congressional elections. Trump also repeatedly claims the conflict between Ukraine and Russia could end very soon — a claim he has made for almost two years. As a result, the market has little faith in such rosy outcomes. Over the weekend, Trump again shifted rhetoric toward Iran, saying he might resume military pressure after the Congressional elections. He also announced an energy truce between Kyiv and Moscow that neither side had heard of.

General conclusions:

On the third trading day of the week, currency pairs may continue making sluggish attempts to correct, since it is hard to expect more now. The euro can be traded today from the 1.1198–1.1218 area, and the pound sterling from the 1.3259–1.3267 area. Volatility may remain low.

Key Rules of the Trading System:

1. The strength of a signal is determined by the time it takes to form the signal (rebound or breakout). The less time taken, the stronger the signal.
2. If two or more trades were opened at a certain level based on false signals, all subsequent signals from that level should be ignored.
3. In a range (flat), any pair can generate many false signals or may not produce any at all. Technical levels may be disregarded.
4. On the hourly timeframe, trading signals from the MACD indicator should be acted upon only when volatility is high, and a trend line or trend channel confirms the trend.
5. If two levels are too close together (within 5-20 pips), treat them as a support or resistance area.
6. After moving 15 pips in the right direction, a stop-loss should be set to break even.

What to Look for on the Charts:

Price levels (areas) of support and resistance serve as targets for opening buy or sell trades or as sources of signals.

Red lines indicate channels or trend lines that show the current trend and the preferred trading direction.

The MACD indicator (14,22,3) — the histogram and signal line — is an auxiliary indicator that can also provide signals.

Important speeches and reports (listed in the news calendar) can significantly influence currency pair movements. Therefore, during their release, traders should approach trading with utmost caution, or exit the market to avoid sudden reversals against the preceding move.

Beginner forex traders 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.