FX.co ★ Key events on December 18: fundamental analysis for beginners

Analysis of macroeconomic reports:

The economic calendar is empty on Monday. Since both currency pairs started a downward correction on Friday, they will likely extend it on Monday. Of course, volatility may decrease significantly compared to Friday, Thursday, and Wednesday. The pair might even stand still for the entire day. However, we still believe that the downward movement will persist.

Last week, the euro and the pound strengthened due to the Federal Reserve, European Central Bank and Bank of England meetings. Each of these meetings supported the euro and the pound. However, there will be no such important events or reports to support an extension of the upward movement in the upcoming week.

Analysis of fundamental events:

Fundamentally, there is nothing to highlight. Moreover, what can we even expect from the representatives of the monetary committees of all three central banks, given that their heads have already been extremely candid?

General conclusion:

On Monday, beginners will have little to pay attention to. We can only analyze the technical picture, but volatility may be quite low. Although after such important events and such strong movements, volatility usually does not immediately drop to zero. We believe that both pairs may move by 50-70 pips on Monday. The preferred direction of movement is to the downside.

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.