Analysis of macroeconomic reports:
There won't be many important reports on Monday, but there is still something on the calendar of events. Let's have a look. The first to be published will be the S&P Global Construction PMI (significance and impact very low). It will stay below 50.0 and no significant changes are expected. The expectation is 45.1 and the current reading is 43.3. This index is unlikely to "jump" above 50, which might support the euro. The EU will release the same kind of report (degree of significance and influence is low). Here the picture is almost the same. The index is at 46.1, while the forecast is 48.2. If the forecast exceeds at least 2-3 points, the euro might get a bonus of 15-20 points up. Next will be the UK's S&P Global Construction/CIPS Construction PMI (degree of importance and influence is low). Growth to 49.1-49.5 is expected, so theoretically, it may climb above 50.0. If it manages to do so, the GBP might gain 20-30 points thanks to this report.
The last to be released will be the EU retail sales report for January (significance and impact - medium). Last month it was down 2.7% m/m, this month it is expected to be up 1.0-1.3%. Despite the higher significance of the report, the actual value should differ from the forecast by at least 0.4-0.5% for the market to work it out. Naturally, a higher than expected value will support the euro, while a lower value will put pressure on the EU currency. If the actual value coincides with a small margin of error, we should not expect any reaction.
Analysis of fundamental events:
The only fundamental event on Monday was the speech of European Central Bank chief economist Philip Lane. ECB President Christine Lagarde and Joachim Nagel (also from the ECB) gave speeches last week and they said that the key rate could rise longer than the March-month period. If Lane also says he is ready to extend the cycle of monetary tightening, the euro will have a bit more reason to continue strengthening against the dollar. However, a momentary reaction to Lane's speech is probably not worth waiting for.
Overall conclusions:
Monday will probably be dull. All the events that are scheduled for release are of very low importance and unlikely to be worked out by traders. Therefore, I don't expect strong movements from EUR/USD on Monday, but GBP/USD may trade more actively and even in a trend, as it is in a sideways channel and technical factors are at the forefront for it.
Basic rules of the trading system:
1) The strength of the signal is determined by the time it took the signal to form (a rebound or a breakout of the level). The quicker it is formed, the stronger the signal is.
2) If two or more positions were opened near a certain level based on a false signal (which did not trigger a Take Profit or test the nearest target level), then all subsequent signals at this level should be ignored.
3) When trading flat, a pair can form multiple false signals or not form them at all. In any case, it is better to stop trading at the first sign of a flat movement.
4) Trades should be opened in the period between the start of the European session and the middle of the US trading hours when all positions must be closed manually.
5) You can trade using signals from the MACD indicator on the 30-minute time frame only amid strong volatility and a clear trend that should be confirmed by a trendline or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 pips), they should be considered support and resistance levels.
On the chart:
Support and Resistance levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14, 22, and 3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend patterns (channels and trendlines).
Important announcements and economic reports that can be found on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.
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