There will be relatively few macroeconomic events on Thursday, but at least we can look forward to some important events. The market will focus on the meetings of the Bank of England and the Federal Reserve. The U.S. central bank meeting took place yesterday evening but its impact may continue throughout the day. Therefore, it's a good thing that there are hardly any economic reports, as they won't interfere with or confuse traders. The dollar has risen quite logically. And it didn't rise based on the results of the Fed meeting, instead it strengthened for general reasons. We have repeatedly mentioned that the euro and the pound are overbought, and now we expect the dollar to rise practically in any fundamental background. And that's exactly what's happening. The Fed didn't even have to raise interest rates or promise future rate hikes for the US currency to appreciate again.
Analysis of fundamental events:From Thursday's fundamental events, the speeches by European Central Bank President Christine Lagarde and Isabel Schnabel stand out, as well as the BoE's rate decision. The main item on today's agenda is the BoE meeting. Financial markets are expecting the BoE to raise interest rates by another quarter point. However, they might exhibit a dovish stance, similar to the ECB's move a week ago. The pound could continue its downward movement even with the rate hike. But it's important to remember that the market could show any reaction, and it's impossible to predict BoE Governor Andrew Bailey's comments in advance.
On Thursday, the main focus should be on the BoE's meeting, with all other events and reports considered secondary of importance. Even Lagarde's speech. The euro may react to the day's main event with the same strength and in the same direction as the British pound.
Basic rules of a trading system:1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, post which all open trades should be manually closed.
5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trend line or trend channel.
6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
How to read charts:Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.
Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.
The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.
Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.
Beginning traders should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.