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

Analyzing Monday's trades:

EUR/USD on 1H chart

EUR/USD lost ground against the greenback at the beginning of the trading week, which had already started on Friday. There was no correction or rebound; the market is simply selling the euro and buying the dollar. The macroeconomic and fundamental background on Monday was relatively weak, although two events still deserved attention. Firstly, the ISM Non-Manufacturing Purchasing Managers' Index (PMI) for the US services sector. Secondly, Federal Reserve Chair Jerome Powell's speech. The ISM Non-Manufacturing PMI significantly exceeded forecasts, which supported the dollar's growth in the second half of the day, while Powell maintained a hawkish rhetoric in his speech. In particular, he reiterated that the interest rate is unlikely to be lowered in March.

All of this supported the US dollar on Monday. Thus, the downtrend persists, and we expect the euro to fall further, as we have been saying for the past two months.

EUR/USD on 5M chart

Only one trading signal was generated on the 5-minute timeframe. During the European trading session, the pair broke through the range of 1.0767-1.0781, after which it dropped to the level of 1.0733 and also broke through it. However, it was quite hesitant in doing so. Beginners could have closed a short position near this level, but the euro may fall further, as the market has clearly strengthened its favor towards the dollar after the previous week.

Trading tips on Tuesday:

On the hourly chart, EUR/USD exhibited a downward movement, as the results of the FOMC meeting were hawkish, and the US labor market and unemployment data were very strong. We considered the possibility that the downtrend would end if the news is disappointing, but that did not happen. So, for now, everything is going as we assumed. The euro is still too overbought and unreasonably expensive.

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 Tuesday, the EU will release a report on retail sales, while the US event calendar is empty. Therefore, we believe that volatility may be weak on Tuesday, but at the same time, the euro may continue to fall if the price surpasses the level of 1.0733. In this case, you can even stay in short positions with a Stop Loss above 1.0733 and a target of 1.0668.

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, 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.

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.