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EUR/USD finally started a downward movement on Thursday, which we have been waiting for a long time. However, there is no guarantee that the pair will continue to trade lower, as investors have had plenty of opportunities to buy the dollar lately, but they did not take advantage of it. Therefore, the bullish bias persists. Nevertheless, the consolidation below the trend line and the significant drop on Thursday allow us to be hopeful.
Among yesterday's macro data, we can highlight the US reports on retail sales and producer prices. The first report showed a positive increase, albeit slightly lower than forecasted. The second report exceeded forecasts (0.6% versus 0.3%). The Producer Price Index could have triggered the dollar's rise, as inflation may accelerate again in the coming months. Taken together, these reports indicate that the Federal Reserve may hold the rate at its current level for a much longer period.
A very long but perfect sell signal was formed on the 5-minute timeframe. As we have previously mentioned, there are good signals when there is volatility in the market. The price remained flat throughout the European session, but at the beginning of the US session, it finally bounced off the level of 1.0940 and dropped below the range of 1.0888-1.0896. Therefore, beginners could have gained about 50 pips of profit from this signal. And at the moment, it is advisable to remain with short positions (or open new ones).
On the hourly chart, EUR/USD has started to move downwards, and all we can do is hope that this time the dollar will rise. We still expect the euro to resume its decline, which, in our opinion, should continue for quite some time. We assume that the bullish correction, which lasted for over a month, has finally ended. If that's the case, then a new downward trend will form. Remember that the euro still lacks significant factors that can support its growth.
The key levels on the 5M chart are 1.0568, 1.0611-1.0618, 1.0668, 1.0725, 1.0785-1.0797, 1.0855, 1.0888-1.0896, 1.0940, 1.0971-1.0981, 1.1011, 1.1043, 1.1091. On Thursday, the Eurozone event calendar is empty. The US docket will feature reports on consumer sentiment from the University of Michigan and industrial production. Although these reports are not crucial, disappointing values may hinder the dollar's growth.
1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, after which all open trades should be manually closed.
5) On the 30-minute timeframe, 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 lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.
Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable 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 signal source.
Significant 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.
Beginning traders should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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