Analysis of Thursday's Trades
1H Chart of EUR/USD
The EUR/USD currency pair attempted to correct on Thursday and then tried to continue its downward movement. In reality, it failed to achieve either, but it is evident that the downward trend remains intact, as previously predicted. The price is hovering near its 2-year lows, with no signs indicating the end of the euro's decline. We continue to believe that the euro's depreciation will persist. Market volatility may drop to nearly zero around Christmas and New Year, delaying further movements for a few weeks, but this does not change the overall outlook. The recent European Central Bank and Federal Reserve meetings have only reinforced the apparent conclusions: the ECB is prepared to continue easing monetary policy, while the Fed will do so very slowly and to a much lesser extent than the market had anticipated. Moreover, the market has already priced in all future policy easing in the US, leaving only the factor of rate cuts in the EU to act upon.
5M Chart of EUR/USD
On Thursday's 5-minute timeframe, exactly one trading signal was generated. At night, the price bounced off the 1.0334-1.0359 area, rising nearly to the 1.0433-1.0451 zone. Novice traders could have entered long positions at the start of the European trading session, and those trades could have been profitable if closed manually.
Trading Strategy for Friday:
On the hourly timeframe, the EUR/USD pair traded within a horizontal channel for almost three weeks, but the Fed meeting results triggered a strong market reaction, breaking the flat pattern. We believe the euro's decline has now resumed. The market may enter a new flat phase during the upcoming holiday weeks, but there are no signs of its onset yet.
On Friday, the price may continue to fall if it breaches the 1.0334-1.0359 zone. Today's likelihood of a flat is relatively high, so traders should be extremely cautious.
On the 5-minute timeframe, consider the following levels for trading: 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. On Friday, no significant events are scheduled in the Eurozone, while the US will release several secondary reports, including the PCE indices and consumer confidence figures.
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
