Analyzing trades on Thursday
EUR/USD on 30M chart
On Thursday, EUR/USD extended its decline, which started the night before. On Wednesday, the US Federal Reserve, the central bank of the country, announced the results of the meeting. This is one of the most important events not only for the US dollar but also for the entire foreign exchange market. The Fed confirmed it was going to raise the key rate at almost every meeting in 2022 (a total of 8 meetings each year). A rate hike is the strongest growth factor for any currency. Accordingly, the advance of the US dollar in the last two sessions was absolutely logical. As we expected yesterday, it took some time for the market to digest the results of the meeting. So, we can say that traders had fully evaluated this event only by Thursday evening. On the 30-minute time frame, the downtrend on the euro/dollar pair continues. Still, there are no levels below 1.1131, as the price has not been there for more than a year.
EUR/USD on 5M chart
On the 5-minute time frame, the pair has been moving in almost only one direction over the past 24 hours. We did not advise novice traders to open positions last night, as the risk was quite high. It was impossible to predict where the pair would move, what Jerome Powell would say at the press conference, and how the market would react. But this morning, at the opening of the European session, it was possible to sell the pair on a sell signal, which was formed half an hour earlier. The price broke through the area of 1.1227-1.1234 and continued its downward movement below 1.1186 to decline by another 50 pips. Since there was no level of 1.1131 (Thursday's low), the short position should have been closed anywhere below the level of 1.1186. This trade could have brought a minimum profit of 50-60 pips. No other trading signals were formed during the day.
Trading tips on Friday
On the 30-minute time frame, the price has left the sideways channel of 1.1234-1.1360. Over the past 24 hours, the pair has fallen by 150 pips, so an upward correction may begin on Friday. However, the downtrend still prevails, so selling the pair is more preferable. On the 5-minute chart on Friday, it is recommended to trade at the levels of 1.1131, 1.1183, 1.1227-1.1234, and 1.1262. There are no other levels below 1.1131, so it will be more difficult to trade there. But for this, the pair must still go below the level of 1.1131. The macroeconomic background will be very weak on Friday. No important publications or other events are planned in the European Union, and only minor reports will be released in the US, which are unlikely to provoke a strong market reaction. We recommend that beginners pay attention only to the University of Michigan Consumer Sentiment Index.
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 in the period 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.
