Analyzing Friday's trades:
EUR/USD on 1H chart
The EUR/USD pair sustained its growth on Friday. There were no significant reasons for the euro to rise and the dollar to fall again, but on Thursday, the price bounced off the ascending trend line, so the pair's growth can be considered reasonable. The problem is that the euro is rising both with and without the support of specific events or reports. On Friday, only two reports were noteworthy. While the report on the number of building permits in the U.S. was weaker than expected, the University of Michigan's consumer sentiment index exceeded market expectations.
Consequently, we saw another increase in the euro rather than the dollar. Thus, there is very little logic in the pair's movements. A break below the trend line would allow a new short-term downtrend to form.
EUR/USD on 5M chart
Two trading signals were formed in the 5-minute time frame on Friday. The first signal occurred overnight when the price precisely bounced off the 1.0971 level. Long positions could have been initiated when the European trading session opened, as the price had moved only a short distance from the entry point. The second buy signal appeared towards the end of the day. In that price area, long positions could have been closed with good profit, as the price had been rising all day.
Trading tips on Monday:
EUR/USD has formed a new upward trend supported by a trend line in the hourly time frame. We believe the euro has fully factored in all the bullish factors, so we do not expect sustained upward movement. The flat phase remains within the 1.06-1.10 range in the 24-hour time frame. However, the market again shows it is ready to react to almost any report by panic selling the dollar. Therefore, while expectations are one thing, the current technical picture should not be ignored. The pair can be expected to fall after the price breaks below the trend line.
On Monday, novice traders might anticipate a decline if the price consolidates below the trend line. In this case, the euro could fall to 1.0888.
The key levels to consider on the 5M time frame are 1.0526, 1.0568, 1.0611, 1.0678, 1.0726-1.0733, 1.0797-1.0804, 1.0838-1.0856, 1.0888-1.0896, 1.0940, 1.0971, 1.1011, 1.1043, 1.1091. Neither the Eurozone nor the U.S. has any fundamental or macroeconomic events scheduled on Monday. Thus, the day is likely to experience reduced volatility.
Basic rules of the trading system:
1) The strength of a signal is determined by the time it took for the signal to form (bounce or level breakthrough). The shorter the time required, the stronger the signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be ignored.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, it's better to stop trading at the first signs of a flat market.
4) Trades should be opened between the start of the European session and mid-way through the U.S. session. All trades must be closed manually after this period.
5) In the hourly time frame, 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 are too close to each other (from 5 to 20 pips), they should be considered as a support or resistance zone.
7) After moving 15 pips in the intended direction, the Stop Loss should be set to break-even.
What's on the charts:
Support and Resistance price levels: targets when opening long or short positions. You can place Take Profit levels near them.
Red lines: channels or trend lines that depict the current trend and indicate the preferred 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 source of signals.
Important 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 effective money management, is key to long-term success in trading.
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