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Analyzing trades on Thursday
EUR/USD on 30M chart
The EUR/USD pair was trading mainly sideways on Thursday. The price was holding near 1.1360 for the entire day, retreating from it by only 30 pips. Unfortunately, the price left the descending channel due to such a distinct flat movement. We mentioned this scenario in the previous article, saying that the current channel was very narrow and was built within a trend in just three days. Therefore, this channel was far from strong. It should be noted that it was not the price that settled above the channel. Instead, the channel went below the price while it was simply moving sideways throughout Thursday. After a short break, the downward movement may well resume, and we believe that this is the main scenario for now. Moreover, bulls failed to gain a foothold above 1.1360 which means traders are not ready to buy the pair. The macroeconomic background was very weak today. The inflation report was published in the EU. This time, it was the second estimate which did not differ much from the first one. However, traders showed no reaction to this data. In the afternoon, the initial jobless claims report was released in the US, which unexpectedly turned out to be much worse than expected. This triggered some sell-offs in the US dollar. But the overall reaction was very weak, with volatility of only 20 pips.
EUR/USD on 5M chart
On the 5-minute time frame, the movement looked just as sluggish as on the 30-minute chart. Throughout the day, the price was trapped in a sideways channel. However, it managed to form one trading signal. In the middle of the European session, the quote rebounded from the resistance area of 1.1360 - 1.1366. At this point, traders should have opened short positions. The signal was rather clear and accurate. However, due to low volatility, the pair failed to develop a strong downtrend. It made several attempts to move lower but the decline was limited to only 20 pips. Therefore, the maximum profit beginners could have earned today was 20 pips. Given the total daily volatility of 40 pips, this was a good result.
Trading tips on Friday
A new downtrend was formed on the 30-minute time frame, but the price had already left the descending channel. We expect that the pair will retest the channel in the near future and will signal a downward movement. However, there is a possibility that the price will stay in the sideways channel of 1.1234 - 1.1360. It spent one week above this range and returned there today. Moreover, the price failed to break above its upper boundary. Even so, the decline towards the lower boundary is considered the main scenario for now. On the 5-minute time frame, the pair will open the trade on Friday between the levels of 1.1315 and 1.1360. Therefore, a breakout or a rebound from any of these levels will serve as a signal. In general, there are quite a lot of levels on the chart now. So you need to be more careful with rebounds within the trend on the intraday chart (if there is one at all). The fundamental background will be completely absent on Friday both in the EU and the US. US Treasury Secretary Janet Yellen will speak tomorrow but her speech will hardly affect the forex market.
Basic rules of the trading system
1) The strength of the signal is determined by the time it took the signal to form (a rebound or a breakout of the level). The quicker it is formed, the stronger the signal is.
2) If two or more positions were opened near a certain level based on a false signal (which did not trigger a Take Profit or test the nearest target level), then all subsequent signals at this level should be ignored.
3) When trading flat, a pair can form multiple false signals or not form them at all. In any case, it is better to stop trading at the first sign of a flat movement.
4) Trades should be opened between the start of the European session and the middle of the US trading hours when all positions must be closed manually.
5) You can trade using signals from the MACD indicator on the 30-minute time frame only amid strong volatility and a clear trend that should be confirmed by a trendline or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 pips), they should be considered support and resistance levels.
On the chart
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14, 22, and 3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend patterns (channels and trendlines).
Important announcements and economic reports that can be found on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.
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