Analysis of Monday's Trades:
1H Chart of the EUR/USD Pair
The EUR/USD currency pair showed no interesting movements on Monday. The day began with a slight gap down; however, throughout the day, quotes increased. It is important to note that a key event of the day was the cancellation of the second round of negotiations between the US and Iran, which means the Strait of Hormuz remains blocked from both sides, and the war in the Middle East may resume on Wednesday, as the two-week ceasefire expires on that day. The market seemed to have all the necessary grounds to resume purchases of the safe-haven dollar. However, the market hardly reacted to this event, leading us to believe that the geopolitical factor continues to recede in importance. Of course, this does not mean we will no longer see market reactions to events in the Middle East. If a full-scale war resumes this week, the dollar could significantly gain in value. However, overall, the market is no longer ready to blindly rush to buy the US currency.
5M Chart of the EUR/USD Pair
On the 5-minute timeframe, only one trading signal was generated on Monday—a buy signal. At the very start of the European trading session, the price bounced off the area of 1.1745-1.1754 and continued to move in only one direction—upwards. Therefore, by the end of the day, beginner traders could have manually closed a long position in profit of about 20 pips.
How to Trade on Tuesday:
On the hourly timeframe, the upward trend remains intact. For two consecutive weeks, the market was selling off the dollar, and geopolitical factors have somewhat receded in importance. However, geopolitics is worsening again, so this week, the US dollar could again be in demand as a safe asset. We believe a correction is possible, but in any case, traders have technical levels to work with, and movements will depend on developments in the Middle East.
On Tuesday, beginner traders may consider short positions if the price settles below the 1.1745-1.1754 area, targeting 1.1655-1.1666. New buy trades can be considered upon a bounce from the area of 1.1745-1.1754, targeting 1.1830-1.1837.
On the 5-minute timeframe, levels to watch include 1.1354-1.1363, 1.1413, 1.1455-1.1474, 1.1527-1.1531, 1.1584-1.1591, 1.1655-1.1666, 1.1745-1.1754, 1.1830-1.1837, 1.1899-1.1908. On Tuesday in the Eurozone, only the ZEW Economic Expectations Index will be published, while in the US, the weekly ADP employment report and retail sales figures are due. All four reports are unlikely to provoke a significant market reaction.
Key Principles of the Trading System:
- The strength of the signal is determined by the time it took to form the signal (bounce or level breakthrough). The shorter the time, the stronger the signal.
- If two or more trades were opened around any level based on false signals, all subsequent signals from that level should be ignored.
- In a range, any pair can generate a lot of false signals or may not generate them at all. Technical levels may be ignored.
- On the hourly timeframe, it is advisable to trade MACD signals only when volatility is good, and the trend is confirmed by a trendline or trend channel.
- If two levels are located too close together (5-20 pips apart), they should be considered a support or resistance area.
- After moving 15 pips in the correct direction, a Stop Loss should be set to breakeven.
What to Look for on the Charts:
Price levels of support and resistance are levels that serve as targets when opening buys or sells. Take Profit levels can be placed around them.
Red lines represent channels or trend lines that show the current trend and indicate the direction in which it is preferable to trade now.
The MACD indicator (14,22,3) – the histogram and the signal line – is a supporting indicator that can also be used as a source of signals.
Important speeches and reports (always included in the news calendar) can significantly affect the movement of the currency pair. Therefore, during their release, trading should be done with utmost caution, or traders should exit the market to avoid sharp price reversals against the previous movement.
Beginning traders in the forex market should remember that not every trade can be profitable. Developing a clear strategy and effective money management are the keys to long-term trading success.
