There are few macroeconomic events on Wednesday, but some of them are important. The UK will release the inflation report for January, and it may provoke as strong a market reaction just like the US inflation report did. Forecasts tell us that the Consumer Price Index will accelerate to 4.1-4.2%. If the latest CPI data exceeds forecasts, then the British pound may strengthen significantly, as this suggests that the Bank of England will keep the rate at its current value for a longer period. If the actual value is lower, then the pound may continue to fall, as this could convince the market that the UK will start trimming rates sooner than expected.
Traders may also look to the second estimate of eurozone GDP numbers for Q4, but we shouldn't expect much from it. Most likely, the value of the indicator will remain at the level of 0%, which we have been observing (plus-minus) for four quarters. Industrial production may fall, which isn't surprising. It will be difficult to expect support for the euro on Wednesday.
Analysis of fundamental events:There will be few fundamental events on Wednesday. Representatives of the Federal Reserve and the European Central Bank speak almost every day, but they do not provide new information. They simply repeat what the market already knows. This week has already seen quite a few speeches, and each time the market reaction has been absent.
General conclusion:On Wednesday, the British currency will depend on the UK inflation report. As we have already mentioned, any deviation from the forecast is capable of causing a strong movement in the GBP/USD pair. And the GBP/USD pair is quite capable of pulling the EUR/USD pair along with it. Therefore, be prepared for strong movements in both pairs. There will be no significant events in the United States, and only second-tier reports are expected in the European Union. The euro may fall further, but perhaps after a short pause.
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, 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.
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.
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.