20.05.202606:17 Forex Analysis & Reviews: What to Focus on May 20? Analysis of Fundamental Events for Beginners

Analysis of Macroeconomic Reports:

There are very few macroeconomic reports scheduled for Wednesday, May 20. Excluding all secondary reports (such as the producer price index in Germany or the second estimate of inflation in the Eurozone), the only significant report left is the UK inflation report, which is published only once and therefore holds particular importance for the market. Of course, traders may choose to ignore this report, just as they have ignored almost all macroeconomic data over the past three months. Moreover, we believe the UK's inflation decline may already have been factored in last week, contributing to the British currency's downfall. The fact is that a reduction in inflation suggests a very likely abandonment of the Bank of England's tightening monetary policy, which the market had clearly anticipated recently.

Analysis of Fundamental Events:

Among the fundamental events on Wednesday, speeches by Federal Reserve representatives Barr and Paulsen are noteworthy. Market expectations regarding Fed monetary policy are currently neutral, and members of the Monetary Committee have not made statements this week that could raise the likelihood of a hawkish scenario by the end of the year. The minutes from the last Fed meeting, which will be released this evening, are also unlikely to affect the overall situation. The meeting took place three weeks ago, and at that time, market expectations and the geopolitical backdrop were entirely different.

The geopolitical landscape has become slightly more positive; however, it is important to remember that new pessimistic data can emerge at any time. Washington and Tehran are still unable to reach an agreement on the most critical issues, so the market must accept that negotiations have not yet been completely halted. The week began with news of possible concessions from the U.S. and new negotiations, but the market has not reacted strongly to this information.

General Conclusions:

During the third trading day of the week, both currency pairs may trade quite sluggishly, but any geopolitical news could provoke a new storm in the market. The British pound should pay special attention to the inflation report. The euro can be traded today in the range of 1.1584-1.1591, while the British pound can be traded in the range of 1.3380-1.3386. Geopolitics remains a 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.