FX.co ★ How to trade EUR/USD on February 3, 2022. Simple trading tips and analysis for beginners

Analyzing trades on Wednesday

EUR/USD on 30M chart

On Wednesday, EUR/USD was easier to trade since the pair was moving within the trend and its movement was much stronger than the day before. The pair continued its upward movement although there were no strong reasons for it in the past three days. Nevertheless, on the eve of the ECB meeting, the bulls were very confident which resulted in strong growth of the European currency. However, everything can change on Thursday when the market evaluates the results. The ECB stance is likely to stay dovish, thus supporting the euro. In case of an opposite scenario, the euro will remain strong as it has already gained 200 pips this week. Therefore, further growth of the euro/dollar pair may be in question. It is better to wait for the market reaction instead of guessing. Trading may be highly volatile on Thursday as the meeting of the central bank is an important event, but the reaction may be unexpected.

EUR/USD on 5M chart

On the 5-minute time frame, the movement was moderate. Let's first discuss the current levels. The levels of 1.1279 and 1.1330 were new, so we did not use them today. The levels of 1.1285 and 1.1315 were considered irrelevant by the end of the day. Now let's move on to trading signals. The first buy signal was formed when the pair broke through the area of 1.1285-1.1292. Novice traders could open long positions there. Subsequently, the price continued to move up and overcame the level of 1.1315, which was another buy signal. After that, the upward momentum slowed down very quickly and the pair consolidated below the level of 1.1315. Therefore, it was necessary to close long positions and open sell orders. However, the downward movement also did not last long and ended near the level of 1.1292, from which the pair rebounded twice. Therefore, it was necessary to close short positions there. It was possible to open new long positions as they eventually turned out to be profitable. They had to be closed manually in the late afternoon. As a result, only three trades were opened and all of them brought a small profit.

Trading tips on Thursday

On the 30-minute time frame, the downtrend was cancelled. The price settled above the level of 1.1234 and continued its upward movement. Let's discuss the further movement of the pair after the ECB meeting results are published. On the 5-minute chart on Thursday, it is recommended to trade at the levels of 1.1227-1.1234, 1.1279-1.1292, 1.1330, and 1.1360-1.1366. There are no other levels below 1.1121 as the price has not been there for more than a year. Therefore, it will be more difficult to trade there. On Thursday, the results of the meeting of the European Central Bank will be announced. This is the most important event of the day for the euro/dollar pair. The movement may intensify and become unpredictable. In the US, a rather important ISM index of business activity in the service sector will be released. It can also have a small impact on trading. A few minor reports that due to be published in the EU and the US are unlikely to have any influence on market sentiment.

Basic rules of the trading system

1) The strength of the signal is determined by the time it took the signal to form (a rebound or a breakout of the level). The quicker it is formed, the stronger the signal is.

2) If two or more positions were opened near a certain level based on a false signal (which did not trigger a Take Profit or test the nearest target level), then all subsequent signals at this level should be ignored.

3) When trading flat, a pair can form multiple false signals or not form them at all. In any case, it is better to stop trading at the first sign of a flat movement.

4) Trades should be opened in the period between the start of the European session and the middle of the US trading hours when all positions must be closed manually.

5) You can trade using signals from the MACD indicator on the 30-minute time frame only amid strong volatility and a clear trend that should be confirmed by a trendline or a trend channel.

6) If two levels are located too close to each other (from 5 to 15 pips), they should be considered support and resistance levels.

On the chart

Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.

Red lines are channels or trend lines that display the current trend and show in which direction it is better to trade now.

The MACD indicator (14, 22, and 3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend patterns (channels and trendlines).

Important announcements and economic reports that can be found on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.

Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.