Analysis of Tuesday's Trades
1H Chart of EUR/USD
On Tuesday, the EUR/USD pair continued to move downward after repeatedly failing to break the 1.0596 level. The pair has been trading within a horizontal channel for several weeks, clearly visible on the chart above. Neither Monday nor Tuesday brought any impactful reports from the U.S. or the Eurozone to stir market activity.
Even last week, the pair's flat movement remained unchanged when a flurry of important data and events occurred. Thus, the conclusion is obvious. The pair has been falling for two months and cannot even form an upward correction. This lack of momentum suggests that the market is preparing for another euro decline, aligning with our predictions. Without a decisive break above 1.0596, further euro growth seems highly unlikely.
5M Chart of EUR/USD
On the 5-minute timeframe, one trading signal was formed on Tuesday, though traders might have considered acting on the signal from Monday. As previously mentioned, the price rebounded from the 1.0596 level, which it had failed to break multiple times before. Tuesday's sell signal was false, but the bearish bias points to a likely second consolidation below this level. Such a move would trigger further declines, with a target at 1.0451.
Trading Strategy for Wednesday:
The EUR/USD pair is still in a corrective phase on the hourly timeframe. However, upward movements are limited to minor, slow progressions, as observed over the past three weeks. For most of this period, the pair has been trapped within the 1.0451–1.0596 horizontal channel. Even after two months of decline, no significant buying interest in the euro is evident.
We expect the downward movement to continue on Wednesday, as the pair failed to overcome the 1.0596 level again. A second consolidation below 1.0526 today could open the door for further declines.
On the 5-minute TF, the following levels should be considered: 1.0269-1.0277, 1.0334-1.0359, 1.0433-1.0451, 1.0526, 1.0596, 1.0678, 1.0726-1.0733, 1.0797-1.0804, 1.0845-1.0851, 1.0888-1.0896. The Eurozone has no significant economic events scheduled for Wednesday. However, the U.S. will release its November inflation report, a critical indicator that will significantly influence the Federal Reserve's decision next week. Traders should pay close attention to this report, as it will likely impact market dynamics.
Core Trading System Rules:
- Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
- False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
- Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
- Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
- MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
- Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
- Stop Loss: Set a Stop Loss to breakeven after the price moves 15 pips in the desired direction.
Key Chart Elements:
Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.
Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.
MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.
Important Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.
Forex trading beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are essential for long-term trading success.
The material has been provided by InstaForex Company - www.instaforex.com
