FX.co ★ Key events on December 5: fundamental analysis for beginners

Analysis of macroeconomic reports:

For Tuesday, several macroeconomic events are scheduled, but traders will only keep an eye on a small number of reports. In half an hour, Services Purchasing Managers' Index (PMI) data will be released in Germany and the European Union. However, these will be second estimates, which are unlikely to differ from the first ones, so we do not expect them to move the market. A bit later, the eurozone Producer Price Index will be released, which currently has an extremely low value, as inflation indicators are falling, and they are quite important to traders.

From the U.S., the Services PMI will also be published, but in two variations. We will highlight the ISM report as it can cause a stir in the market. In addition, the JOLTs Job Openings report will be released, which is also quite important for understanding the current state of the US labor market. Therefore, we advise you to focus on the U.S. reports, and expect the main movements during the U.S. trading session.

Analysis of fundamental events:

There is nothing particularly important scheduled on Tuesday. As we have repeatedly mentioned, fundamental events currently have almost no significance for the dollar, the euro, or the pound. Central bank representatives have not shared any new or even useful information with the market for a very long time. Therefore, traders do not react to their speeches. Moreover, they do not even influence the overall fundamental background since none of the three central banks we regularly talk about is ready to raise or lower the key rate in the near future.

General conclusion:

On Tuesday, all the crucial reports will be released during the U.S. session. We believe that JOLTs and ISM reports may elicit a clear market response. Dollar positions remain unsteady. It has been declining for a long time, and signs of its possible strengthening have finally begun to appear. However, if this week's U.S. reports turn out to be weak again, both currency pairs can quickly resume the uptrend.

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, 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.