FX.co ★ Trading plan for EUR/USD on December 4. Simple tips for beginners

Analyzing Friday's trades:

EUR/USD on 30M chart

EURUSD faced negative trades on Friday, following the trend from the previous day. By the end of both the trading day and week, the price rebounded upward as the U.S. released another report that did not support the greenback. In addition, Federal Reserve Chair Jerome Powell delivered a speech. Although his speech cannot be interpreted as distinctly hawkish or dovish, the market had a reason to sell the dollar. In simpler terms, Powell's speech could be interpreted in either direction. In this case, the market chose to sell the dollar, which it has been repeatedly doing in recent weeks.

Nevertheless, the pair consolidated below the ascending trendline established a day earlier, indicating that for the first time in a long time, there are quite specific reasons to expect a decline in the euro. The pair did not breach the first target at 1.0835, but this does not mean that it cannot surpass this mark on a second attempt. We still expect the euro to fall. The single currency is overbought, and there are no fundamental reasons for it to rise in the long term.

EUR/USD on 5M chart

On the 5-minute timeframe, two trading signals were generated, both of which were almost ideal. Throughout the European session, the price stood still, but then it plummeted down to the level of 1.0835. This was a good signal, so beginners could easily earn around 40 pips with a short position. This was followed by a rebound from the level of 1.0835, which should have been used to open longs with 1.0896 as the target. Although the pair did not reach this level, the price came very close to it, so the trade should have been manually closed, yielding another 30-40 pips.

Trading tips on Monday:

On the hourly chart, the pair finally started to trade lower and now it has a real chance to form a downtrend. EUR/USD has breached the trendline, the pair is overbought, and the eurozone inflation data puts pressure on monetary policymakers to halt their string of interest rate hikes. Therefore, we advise you to consider the pair's decline. Monday might be a "boring" day, but after a trend change, the pair is likely to gravitate towards the level of 1.0835.

On Monday, European Central Bank President Christine Lagarde, as well as her deputy Luis de Guindos will speak. They may comment on the latest inflation report, according to which the inflation rate has already slowed to 2.4%. If we hear such comments, they are unlikely to be hawkish, as the ECB does not currently need another rate hike. Dovish comments should exert pressure on the euro. We believe that it is reasonable to expect the pair to fall to 1.0835 today.

Basic trading rules:

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.

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.

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.