Key events on October 26: fundamental analysis for beginners

There will be a small number of macroeconomic events on Thursday, but nearly all of them are important. There are no significant reports lined up in the EU and the UK, but the US will release important reports on quarterly GDP and orders for durable goods. The US economy is forecast to have grown by 4.3% in the third quarter. In this case, we expect the dollar to rise further. With a forecast of 1.7% for the durable goods orders, we can also expect the greenback to trade even higher. However, we shouldn't forget about the European Central Bank meeting. It can influence not only the euro but also the pound, as the euro can pull the pound with it. In general, we are in for a very interesting day.

The only fundamental event will be the ECB meeting. There are no questions about the interest rate; it will remain unchanged at 4.5%. However, ECB President Christine Lagarde's speech may trigger a strong market reaction. It is difficult for us to inform you what Lagarde should say in order for the market to respond, as her recent speeches have not come with any immediate reaction from the market. Moreover, the market reaction to the ECB meeting itself may be weak, as we have seen in the past. Therefore, the event may be high-profile, but in reality, the market may not find it interesting enough.

On Thursday, there are several important reports, plus the ECB meeting. Therefore, volatility may gradually increase, and we can expect frequent reversals because events and reports can vary in nature. The euro and the pound may hold on to their corrective movements, as the euro is supported by the trendline, and the pound by the level of 1.2107.

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.

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.