20.08.202605:14 Forex Analysis & Reviews: What to Watch on August 20? Analysis of Fundamental Events for Beginners

Review of Macroeconomic Reports

There are very few macroeconomic publications scheduled for Thursday, and none of them are significant. What can we highlight in today's economic calendar? The producer price index in Germany? The monthly report from the Bundesbank? Unemployment claims in the U.S.? All of these reports are secondary and will not elicit any market reaction. Thus, technical factors will take precedence today.

Review of Fundamental Events

There is absolutely nothing to highlight among the fundamental events on Thursday. Representatives of the Federal Reserve's Monetary Committee continue to remain silent, as required by Kevin Warsh's new public communication strategy, so there is no "fresh" information regarding the Fed's plans. Yesterday, European Central Bank President Christine Lagarde delivered a speech, but she did not provide anything significant for markets. Nonetheless, the ECB may conduct a second monetary policy tightening this fall, just as the Bank of England is, which is again facing rising inflation.

The geopolitical backdrop continues to leave much to be desired. The U.S. and Iran are not currently engaged in any negotiations, the Strait of Hormuz remains closed or partially closed, and the Yemeni Houthis maintain a blockade of Saudi Arabia. Tehran has presented a list of demands to Washington necessary for reopening the Strait of Hormuz, which Donald Trump will not agree to under any circumstances. Iran has also warned Washington that if the blockade of the strait is not lifted, it will commence a "clearance" of the strait using its own forces. The rhetoric is clearly escalating, and oil prices are rising again.

General Conclusions:

During the penultimate trading day of the week, currency pairs may trade quite sluggishly again, as there will be few important news items today. The euro can be traded today in the area of 1.1655-1.1665, while the British pound can be traded in the areas of 1.3587-1.3598 and 1.3631-1.3641. Overall, we expect further strengthening of both the euro and the pound against the U.S. dollar, and only geopolitical issues or a technical necessity to correct could hinder this upward momentum.

Main Rules of the Trading System:

1. The strength of the signal is assessed by the time it took to form the signal (bounce or level breakthrough). The less time required, the stronger the signal.
2. If two or more trades are opened around a certain level based on false signals, all subsequent signals from that level should be ignored.
3. In a flat, any pair can form a multitude of false signals or none at all. Technical levels may be disregarded.
4. When trading based on MACD signals on the hourly timeframe, it is advisable to do so only when volatility is high and a trend line or channel supports the trend.
5. If two levels are too close to each other (from 5 to 20 pips), they should be regarded as a support or resistance area.
6. After a 15-pip move in the correct direction, a Stop Loss should be set to break even.

What the Charts Show:

Support and resistance price levels (areas) are the targets when opening buy or sell orders or sources of signals.

Red lines denote channels or trend lines that reflect the current trend and indicate in which direction trading is currently favored.

The MACD indicator (14,22,3) – histogram and signal line – is a supporting indicator that can also be used as a source of signals.

Important speeches and reports (as listed in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be approached with utmost caution, or one should exit the market to avoid sharp price reversals against the preceding movement.

Beginners in Forex trading should remember that not every trade can be profitable. Developing a clear strategy and proper money management are essential for long-term trading success.