FX.co ★ Trading plan for EUR/USD on December 6. Simple tips for beginners

Analyzing Wednesday's trades:

EUR/USD on 30M chart

EUR/USD came under renewed bearish pressure. The euro is truly an interesting and unpredictable currency. First, it rapidly rises for over a month, causing confusion among all experts, and then it falls at the same speed, although there are not always significant reasons and grounds for this. However, we already warned you that the euro is overbought. It has climbed way too high. Partly to blame for this was the dollar itself, since the US has published weak reports for the past month. However, we have to remember that reports are not the only factors that matter. The overall fundamental background is also important, and it does not suggest a firm strengthening of the euro. The economy in the EU is no stronger than the US economy, so a few weak reports should not undermine the dollar.

On Wednesday, the US released another weak report. The number of new jobs from ADP was 30,000 below forecasts. Yes, this report is not crucial for the market, as there is the NonFarm Payrolls. Moreover, the readings of Nonfarms and ADP almost never coincide. Nevertheless, the report was weak, and yet the dollar rose.

EUR/USD on 5M chart

On the 5-minute chart, several trading signals were generated. The price bounced off the level of 1.0835 four times and managed to fall by 15 pips twice. Therefore, beginners could open two short positions, which closed at the Stop Loss at breakeven. The fourth signal around 1.0835 finally pushed the pair to fall to the level of 1.0781, but it should not have been executed, as the three previous signals turned out to be false signals.

Trading tips on Thursday:

On the hourly chart, EUR/USD finally started to trade lower and now it has a real chance to form a new 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. This week, US reports on Friday could spoil the whole party for the dollar, but the market has finally tuned in to sell, so this should not seriously interfere with the trend.

The key levels on the 5M chart are 1.0568, 1.0611-1.0618, 1.0668, 1.0733, 1.0767-1.0781, 1.0835, 1.0896-1.0904, 1.0940, 1.0971-1.0981, 1.1011, 1.1043, 1.1091. On Thursday, there will be a couple of interesting events. In the European Union, the third estimate of GDP for the third quarter will be released, and in the United States, the standard report on jobless claims. Neither the first nor the second report is capable of causing a strong market reaction. Most likely, volatility will remain low, and the pair will continue to fall.

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.