Key events on February 1: fundamental analysis for beginners

There's a full plate of macroeconomic events slated for Thursday, but the movement of both currency pairs will largely depend on the fundamental events – the meetings of the Federal Reserve and the Bank of England. But let's start with the economic reports. On Thursday, euro area Manufacturing PMIs and eurozone inflation figures will be published. Germany and the United Kingdom will also release similar indices. These are secondary of importance, and they will clearly be in the shadow of more significant events.

The eurozone inflation report for January is expected to show that the indicator may decrease by another 0.1%. The decrease may not be crucial, but it is another reason for the European Central Bank to consider lowering interest rates in the coming months. If inflation falls more than expected, below 2.8% annually, then we can expect the euro to fall, unless the market ignores this report in favor of the BoE and FOMC meetings.

From the US docket, weekly Initial Jobless Claims and an important report on the ISM Manufacturing PMI, which has a rather weak forecast, will also be due on Thursday.

There will also be a good number of fundamental events on Thursday. Firstly, the BoE meeting. Secondly, ECB President Christine Lagarde's speech. Thirdly, the Fed meeting, which the market may start reacting to on Thursday. Since there will be many macroeconomic and fundamental events, both currency pairs may change direction several times during the day.

It will be quite difficult to provide forecasts on the direction of both currency pairs due to the strong and diverse macroeconomic and fundamental background. Events and reports may alternately support either the dollar or the European currencies. Therefore, the main thing to do is not to rush and to be extremely cautious when opening any trades.

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, after 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 trendline 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.

Beginners 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.