21.10.202604:16 Forex Analysis & Reviews: What to Watch on October 21? Fundamental Events Explained for Beginners

Review of macroeconomic releases:

Very few macroeconomic releases are scheduled for Wednesday. Early Wednesday morning, the UK will publish the inflation report, the day's most important release. Headline CPI is expected to rise to about 3.4% year-on-year — already high enough to push the Bank of England toward tighter policy. BoE rate hikes have been building as a risk for months, and Bailey and other MPC members have not denied the need to raise rates. In our view, the market has not fully priced in this factor because sterling has mostly weakened recently, so GBP still has room to rise.

Review of fundamental events:

Wednesday features speeches by BoE governor Andrew Bailey and European Central Bank president Christine Lagarde, plus remarks from ECB chief economist Philip Lane. All three can matter for the pound and the euro because the ECB holds its penultimate meeting of the year next week and the BoE meets in two weeks. In both cases, further tightening is possible. Eurozone inflation is already at 3.8%, so the ECB could pause in October — but a pause makes sense only if the bank is confident inflation is transitory.

Geopolitics remains a concern. The US and Iran are not in official talks, although Donald Trump continues to say a deal could be struck after the US Congressional elections. Trump also repeatedly claims the Russia–Ukraine conflict could end soon — a theme he has pushed for nearly two years — and markets have little faith in such optimistic rhetoric. Neither conflict is certain to be resolved before year-end. Iran hopes a Republican loss will ease US pressure; US policy remains uncertain.

Conclusions

On the third trading day of the week, currency pairs may continue to climb, as sellers may have become saturated. Trade the euro from around 1.1198–1.1218 and the pound from around 1.3380–1.3386. Volatility today could be elevated.

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, set a stop-loss 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.