FX.co ★ Key events on January 30: fundamental analysis for beginners

Analysis of macroeconomic reports:

There won't be many macroeconomic events on Tuesday, but there will be some noteworthy reports. The eurozone Gross Domestic Product (GDP) for the fourth quarter will be due. The economy is expected to contract by an additional 0.1%. While this is a small contraction and doesn't signify a recession, it does represent the second consecutive negative quarter. The European Central Bank is getting closer to transitioning to a dovish policy, which could exert pressure on the euro.

The UK event calendar is empty, and the US will release the JOLTs report on job openings for December. The forecast for this report is neutral, but any deviation of the actual value from the forecast can trigger a notable market reaction. The most interesting events of the week are just ahead.

Analysis of fundamental events:

Among the fundamental events of Tuesday, we can only highlight the speech of Chief Economist of the ECB, Philip Lane. Luis de Guindos, Mario Centeno, and Peter Kazimir already spoke on Monday. They did not provide clarity on the ECB interest rates, as all three had different views on the timing of the rate cuts. It's unlikely for Lane to provide some clarity to the situation.

General conclusion:

We expect the movement of both currency pairs to be relatively weak on Tuesday. The flat phase will likely persist for the pound, while a downward trend seems to have resumed for the euro. Therefore, we can expect modest downward movement for the EUR/USD pair. The pound may also drop to the level of 1.2611, but overcoming it will be a challenging task. The flat will not end if the price does not surpass this level.

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, after 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 trendline 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.

Beginners 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.