Analysis of Tuesday's Trades
1H Chart of EUR/USD
On Tuesday, the EUR/USD currency pair showed an inclination to rise again. A closer examination of intraday movements reveals that the pair initially increased, then decreased, and subsequently rose again. Two out of these three movements aligned with the macroeconomic context, as the ZEW indices for the Eurozone and Germany exceeded expectations, alongside stronger-than-anticipated U.S. data. However, the final upward movement was not supported by these macroeconomic factors, highlighting a key issue with the current price action. The market seems to either completely disregard incoming data and sell the dollar or react to reports and then sell the dollar again. As a result, the current price movement cannot be considered logical.
However, this does not mean that trading is impossible at the moment. It is essential to understand the nature of the current movement. The uptrend remains intact on the hourly timeframe, but the dollar continues to weaken, primarily due to Donald Trump's policies.
5M Chart of EUR/USD
On the 5-minute timeframe, three trade signals were generated on Tuesday. First, the pair bounced off the 1.0940-1.0952 range and reached the nearest target at 1.0896, making this trade profitable. Following that, two more bounces occurred in the 1.0888-1.0896 area, and by the evening, the price had returned to the 1.0940-1.0952 range. Thus, novice traders could have opened two trades, each yielding approximately 25 pips in profit.
Trading Strategy for Wednesday:
On the hourly timeframe, the EUR/USD pair remains in a medium-term downtrend, but the chances of a continuation are diminishing. Since the fundamental and macroeconomic backdrop still favors the U.S. dollar more than the euro, we continue to expect a decline. However, Donald Trump continues to push the dollar lower with his tariff decisions and statements about U.S. global policy. Fundamentals and macroeconomics remain overshadowed by politics and geopolitics, leading to a constant decline in the dollar.
On Wednesday, the euro may move in any direction, as macroeconomic and fundamental factors currently do not consistently impact the pair. Thus, trading from the 1.0940-1.0952 area remains relevant.
On the 5-minute timeframe, key levels to watch are 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, 1.0940-1.0952, 1.1011, and 1.1048. On Wednesday, the second estimate of February inflation will be released in the Eurozone, but it is unlikely to trigger a market reaction. However, the Federal Reserve meeting, Powell's speech, and the "dot plot" chart could cause market turbulence in the evening.
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.
