27.05.202606:50 Forex Analysis & Reviews: What to Focus on May 27? Analysis of Fundamental Events for Beginners

Analysis of Macroeconomic Reports:

There are no macroeconomic reports scheduled for Wednesday, May 27, except for the entirely secondary ADP report, which has been released weekly recently. However, markets often ignore even the monthly report. Thus, today the only topic for discussion in the markets will again be the ceasefire between Iran and the U.S., which has not been confirmed by Tehran or any real facts. On the contrary, U.S. military forces struck Iranian boats and missile installations near the Strait of Hormuz yesterday, so by the end of the week, we may see escalation and a breakdown of negotiations, rather than a deal and a ceasefire.

Analysis of Fundamental Events:

Among the fundamental events on Wednesday, one can highlight the speeches of Federal Reserve Monetary Committee members Lisa Cook and Lorie Logan. Market expectations regarding the Fed's monetary policy have become more hawkish lately, but we are currently only talking about a maximum of one tightening closer to the end of the year. The dollar has already benefited from the market's shift in sentiment towards a more hawkish stance. Current expectations regarding the European Central Bank's monetary policy are contradictory. On one hand, inflation is accelerating; on the other hand, the EU economy is showing signs of slowing. On one side, a rate hike in June seemed predetermined a few weeks ago, while on the other, doubts are now emerging about the ECB's readiness for aggressive hawkish action.

The geopolitical backdrop became more encouraging last week, but it is worth recalling that Trump's statements have repeatedly been disproven, and the U.S. president's rhetoric can change several times a day. Negotiations between Washington and Tehran have resumed, and according to the U.S. president, "they are very successful." However, no confirmations of diplomatic success have come from Iran. Moreover, a new breach of the ceasefire occurred in the Strait of Hormuz yesterday. Thus, at this time, the parties to the conflict are closer to a new war than to a deal.

General Conclusions:

On the third trading day of the week, both currency pairs may trade quite sluggishly unless new messages emerge regarding the conflict and ceasefire in the Middle East. The euro can be traded today in the range of 1.1655-1.1666, while the British pound can be traded in the range of 1.3456-1.3476. Geopolitics remains the key influencing factor in the currency market.

Main Rules of the Trading System:

1. The strength of the signal is determined by the time it took to form the signal (bounce or breakout of the level). The less time it took, the stronger the signal.
2. If two or more trades were opened near any level based on false signals, all subsequent signals from this level should be ignored.
3. In a flat market, any pair can generate many false signals or none at all. Technical levels may be ignored.
4. On the hourly timeframe, it is preferable to trade signals from the MACD indicator only in the presence of good volatility and a trend that is confirmed by a trend line or trend channel.
5. If two levels are too close together (5-20 pips apart), treat them as a support or resistance zone.
6. After a move of 15 pips in the right direction, a Stop Loss should be set to breakeven.

What is on the Charts:

Price levels (areas) of support and resistance – levels that are targets when opening purchases or sales, or sources of signals.

Red lines – channels or trend lines that display the current trend and indicate which direction is preferable to trade now.

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

Important speeches and reports (contained in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be done as cautiously as possible, or one should exit the market to avoid a sharp price reversal against the preceding movement.

Beginners trading in the Forex market should remember that not every trade can be profitable. Developing a clear strategy and sound money management are key to long-term trading success.