FX.co ★ Key events on December 19: fundamental analysis for beginners

Analysis of macroeconomic reports:

There are a small number of macroeconomic events scheduled on Tuesday. The final estimate of the Eurozone Harmonized Index of Consumer Prices (HICP) for November will be released. This is a significant report that directly influences the European Central Bank's monetary policy, but the second estimate rarely differs from the first. In this case, the market hardly reacts to this kind of data. In the current circumstances, where the ECB no longer intends to raise the key interest rate, inflation becomes a mediocre indicator. We shouldn't expect significant changes from it, and modest changes will certainly not affect the ECB's monetary policy.

The US will release a report on building permits. This report is also secondary of importance, and the market reaction to it may be weak. Thus, the macroeconomic background is unlikely to have a strong impact on traders' sentiment on Tuesday.

Analysis of fundamental events:

Fundamentally, there is nothing to highlight on Tuesday. No important speeches or other events are planned. Of course, some high-ranking official or central bank representative may give an unscheduled interview, but in general, we don't expect important information from them at the moment. Jerome Powell, Christine Lagarde, and Andrew Bailey already provided clear comments on monetary policy last week, and it is unlikely that any of their colleagues will share new information now.

General conclusion:

On Tuesday, we would advise that you pay attention to the EU inflation report, but it is unlikely to be resonant, and it is unlikely for the market to react to it. Therefore, there will be no significant events throughout the day. We expect both currency pairs to exhibit low volatility and a tendency to decline. We believe that the euro and the pound should return to the positions they held before the meetings of the Federal Reserve, the ECB, and the Bank of England.

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.