Friday's Trade Analysis:
1H Chart of EUR/USD Pair
The EUR/USD currency pair traded lower again on Friday. The saying goes, "The music didn't play for long." The euro rose for a mere day and a half before turning downward again. On Friday, there were no significant data releases in the Eurozone, but earlier in the week, Christine Lagarde's remarks set the tone for the euro's sustained decline. However, we believe the euro should be falling regardless of Lagarde's influence, as the market has already priced in the Federal Reserve's monetary easing, and now it's time to factor in the European Central Bank's monetary easing, which is unfolding faster than the market expected.
Additionally, the ECB rate may even be lowered below the "neutral level," as several central bank representatives suggested. As we can see, there are plenty of reasons for the euro's decline, especially considering it has been rising for two years. Even crossing the trendline has yet to lead to a correction. As before, we continue to support the pair's decline, as any correction will merely present a good opportunity for fresh sales.
5M Chart of EUR/USD Pair
No trading signals were generated on Friday in the 5-minute time frame. The pair barely reached the resistance area of 1.0845-1.0851 before falling to the 1.0792-1.0804 area. Entering buys or sells at the end of the trading day and week did not make sense.
How to Trade on Monday:
In the hourly time frame, the EUR/USD pair may start to correct after a month of decline. At the very least, some grounds exist for the euro to rise. We believe the pair could begin an upward correction, though it is unlikely to be strong and would require news supporting the euro. In the medium term, we still expect further decline.
On Monday, novice traders may trade from the 1.0792-1.0804 area again. If there's a breakout below, it would be an excellent opportunity for new sales. However, the trendline has been breached, so at least one more upward correction is possible.
In the 5-minute time frame, consider trading at levels 1.0678, 1.0726-1.0733, 1.0797-1.0804, 1.0845-1.0851, 1.0888-1.0896, 1.0940-1.0951, 1.1011, 1.1048, 1.1091, and 1.1132-1.1140. On Monday, no significant events are scheduled in either the Eurozone or the U.S., so volatility may again be low, and the euro may attempt at least one more round of correction.
Basic Trading System Rules:
- The strength of a signal is determined by the time it takes to form (whether a bounce or breakthrough of a level). The quicker the formation, the stronger the signal.
- If two or more trades have been made near a level due to false signals, any further signals from that level should be ignored.
- In a flat market, a pair can generate many false signals or none at all. In any case, it's best to stop trading at the first signs of a flat market.
- Trading occurs between the start of the European and middle of the US sessions, after which all trades should be manually closed.
- On the hourly time frame, it's recommended to trade MACD indicator signals only when there is good volatility and a trendline or trend channel confirms a trend.
- If two levels are too close together (5 to 20 pips apart), they should be treated as support or resistance areas.
- After the price moves 15 pips in the intended direction, set the Stop Loss to breakeven.
What's on the Charts:
Support and Resistance Levels: Levels that serve as targets for opening buys or sells. Take Profit levels can be placed around these areas.
Red Lines: Channels or trend lines that indicate the current trend and the preferred trading direction.
MACD Indicator (14,22,3): Histogram and signal line—an auxiliary indicator that can also be used as a source of signals.
Major speeches and reports (always found in the news calendar) can significantly impact currency pair movements. Therefore, it's advised to trade cautiously or exit the market during their release to avoid sharp price reversals against prior movements.
Beginners trading on the forex market should remember that not every trade will be profitable. A clear strategy and money management are the keys to success in long-term trading.
The material has been provided by InstaForex Company - www.instaforex.com #
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