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

Analysis of macroeconomic reports:

There are few macroeconomic events scheduled for Thursday, but some of the reports may provoke a market reaction. First of all, we should pay attention to the unemployment rate, claimant count change and wages in the UK. These are quite important reports, but we are unsure whether the market will show a logical reaction to them. It is worth pointing out that the market has used almost any event to buy the pound or the euro. Therefore, an increase in unemployment or a decrease in the growth rate of wages does not guarantee that the pound may fall. Meanwhile, the United States will only publish a report on initial jobless claims, which is a minor report that has an extremely low chance of provoking a market reaction.

Analysis of fundamental events:

Among the fundamental events, we can highlight the European Central Bank meeting and ECB President Christine Lagarde's speech. However, these events only sound important. The ECB is expected to leave interest rates unchanged when it meets later today, and there is a 90% probability that Lagarde will take a neutral and cautious stance regarding the next meeting in September. Therefore, the market is unlikely to receive new and important information from the ECB today. In any case, the euro continues to rise while the ECB has already lowered borrowing costs. This is illogical and uncalled for. Looking ahead, Federal Reserve policymakers Michelle Bowman and Mary Daly will also be delivering speeches during the US trading hours.

General conclusions:

On Thursday, market participants may focus on the ECB meeting. It is likely to be entirely uneventful, but the market may show some reaction to this event. Pound traders should not overlook the unemployment and wage data in the UK. In both cases, it is unlikely for the euro and the pound to show a significant decline. A small bearish pullback is possible, but nothing more.

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.