There are few macroeconomic events on Wednesday. We will only highlight the UK inflation report, and this is quite important for the British currency. Over the past six months, the pound has either been rising or it remains stagnant. Demand for the British currency remains consistently high. Therefore, if UK inflation drops, this may curb buyers' enthusiasm, as the Bank of England would have reasons to soften its rhetoric on monetary policy. The BoE's meeting is scheduled for tomorrow. So, if inflation falls to 3.5% or lower, this may exert significant pressure on the pound. On the other hand, a small drop in inflation may even boost the British currency.
Analysis of fundamental events:There is only one fundamental event scheduled for Wednesday. But what an event it is! In the evening, the results of the FOMC meeting and the US central bank's decision on interest rates will be announced. However, there is no intrigue here. Rates are expected to remain unchanged. However, following this, Federal Reserve Chair Jerome Powell will hold a press conference, and lastly, members of the monetary committee will present their forecasts on interest rates. If they show a more hawkish stance (indicating fewer rate cuts in 2024), this will support the US dollar.
Today, we expect both instruments to continue their respective downward movements, but everything will depend on the results of the FOMC meeting and the UK inflation report. We believe that the dollar should appreciate in the medium term, but today, both currency pairs may also rise.
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.