FX.co ★ Trading plan for EUR/USD on May 7. Simple tips for beginners

Analyzing Monday's trades:

EUR/USD on 1H chart

EUR/USD did not show any interesting movements on Monday. There was one attempt to trade higher during the day, but it quickly fizzled out. The overall volatility of the day was 35 pips, so we witnessed another "boring Monday." Traders failed to overcome the level of 1.0785 on the second attempt, giving hope for the end of the bullish correction, which has persisted for too long. There were quite concrete and reasonable reasons for this, as the US has been publishing disappointing macro data for the past two weeks. However, the Federal Reserve's meeting appeared more hawkish than many market participants thought. Fed Chair Jerome Powell openly signaled that rate cuts aren't imminent. Therefore, the rate will remain at its peak for a longer time. This is a bullish factor for the US currency.

EUR/USD on 5M chart

Only one trading signal was formed on the 5-minute timeframe. At the beginning of the US trading session, the pair bounced off the 1.0785-1.0797 area, after which it managed to fall by about 8 pips until the end of the day. A short position can be left open for Tuesday, as the price may fall by another 20-30 pips. We shouldn't expect a larger movement due to low volatility, and there may also be few trading signals.

Trading tips on Tuesday:

On the hourly chart, the EUR/USD pair is going through a corrective phase. We believe that the decline should resume in the medium term, as the euro remains relatively high, and in general, the global trend is pointed downwards. The fundamental background still works in favor of the US dollar, and the latest FOMC meeting supports this - now Powell doesn't even know when monetary policy easing will begin.

On Tuesday, it is reasonable to maintain short positions, as the price rebounded from the 1.0785-1.0797 area on Monday, and the uptrend has remained intact for too long. However, overcoming this area will make it possible for traders to reconsider intraday purchases aiming for 1.0838-1.0856.

The key levels on the 5M chart are 1.0483, 1.0526, 1.0568, 1.0611, 1.0678, 1.0725-1.0733, 1.0785-1.0797, 1.0838-1.0856, 1.0888-1.0896, 1.0940, 1.0971-1.0981. Today, the EU retail sales report will be published, and this is the only event of the day. The US event calendar is empty. Most likely, we can expect very weak movements again.

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.