Investors may monitor today's economic reports for fresh impetus. The ZEW Indicator of Economic Sentiment for Germany and the eurozone will be released. These are quite interesting reports, so they might trigger a reaction. The UK will publish data on unemployment, jobless claims, and average earnings. While none of these three reports can be considered highly important, they can't be considered secondary either. The US is scheduled to release reports on retail sales and industrial output. These reports can't be classified as either secondary or important.
Today, traders will have access to a total of seven reports, with over half of them potentially causing moderate market reactions. We don't believe such data will be capable of changing traders' sentiment to the opposite. Both pairs are currently in the process of correcting higher, so we believe that the euro and the pound will continue to rise.
Analysis of fundamental events:Among the fundamental events, we can highlight the speeches of representatives of the European Central Bank, Federal Reserve, and even the Bank of England. Some of you may wonder why we mention these events, as they don't have any influence on the pair's movements. Central bank representatives' speeches help set the overall background for a particular currency. For example, the Fed's background is "moderately hawkish," the ECB's is "neutral," and the BoE's is "indecisive." This background can influence market sentiment in the medium term. So, today, we'll have speeches from Bailey of the BoE, de Guindos from the ECB, Williams, Barkin, and Bowman from the Fed.
There won't be any crucial events on Tuesday. However, reports of moderate significance will be published, and each of them could trigger a market reaction of 30-40 pips. Therefore, today may hold more volatility stoking news and events, but at the same time, there might be more reversals for each pair.
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.