Analysis of Macroeconomic Reports:
Only a few macroeconomic events are scheduled for Wednesday, but some are highly significant. Starting with the UK inflation report, recent data indicates that the UK economy is contracting again while inflation is rising. As a result, the Bank of England is unlikely to decide on a rate cut during its final meeting of the year. However, today's inflation report could change the outlook. If inflation grows less than the forecasted 2.6% for November, this would significantly increase the likelihood of a rate cut tomorrow, potentially causing the British pound to weaken substantially. On the other hand, a stronger-than-expected rise in inflation is more likely and could support the pound.
In the Eurozone, the second estimate of November inflation will be released, but it is considered secondary in importance. In the US, reports on building permits and housing starts will be published, but these are also not key events.
Analysis of Fundamental Events:
The key fundamental event for Tuesday is the FOMC meeting. This meeting is essential on its own, but it's worth noting that the market will also get an updated dot plot, which reflects the expectations of the monetary committee members regarding rate changes over the next two years. In simpler terms, the dot plot will illustrate the committee's stance. A press conference with Jerome Powell is also scheduled, which will provide further insights into the Fed's outlook.
General Conclusions:
The British pound could exhibit significant volatility starting early on the third trading day of the week due to the UK inflation report. The euro, however, is likely to remain relatively calm until the evening, when volatility could spike following the FOMC meeting. Today, technical analysis takes a back seat, with macroeconomic and fundamental factors driving movements in both currency pairs.
Key Rules for the Trading System:
- Signal strength is determined by the time it takes for a signal to form (bounce or breakout of a level). The shorter the time, the stronger the signal.
- If two or more false signals are generated near a level, subsequent signals from that level should be ignored.
- In a flat market, any pair may produce numerous false signals or none at all. In such cases, it's better to stop trading at the first signs of consolidation.
- Trades should be opened during the European session through the middle of the American session. All trades should be manually closed thereafter.
- On the hourly timeframe, trades based on MACD signals should only be executed during periods of strong volatility and trends confirmed by trendlines or trend channels.
- If two levels are very close (5–20 pips apart), they should be treated as a support or resistance zone.
- After a 15–20 pip movement in the correct direction, set a Stop Loss at breakeven.
What's on the Charts:
Support and Resistance Levels: Targets for opening buy or sell orders. These are ideal points for setting Take Profit levels.
Red Lines: Trendlines or channels reflecting the current trend direction and indicating the preferred trading direction.
MACD Indicator (14,22,3): A histogram and signal line serving as auxiliary indicators and sources of signals.
Key News Events and Reports: Always listed in the economic calendar, these can significantly impact currency pair movements. Exercise caution or exit the market during such events to avoid sharp price reversals.
Every trade cannot be profitable. The key to long-term success in Forex trading lies in developing a clear strategy and effective money management.
The material has been provided by InstaForex Company - www.instaforex.com
