21.01.202607:26 Forex Analysis & Reviews: How to trade the EUR/USD currency pair on January 21? Simple tips and trade review for beginners

Review of Tuesday's trades:

1H chart of the EUR/USD pair

The EUR/USD currency pair continued its upward move on Tuesday, breaking the descending trendline. Thus, it became clear already in the morning that the market intends to continue disposing of the US dollar amid events around the island of Greenland. Recall that Donald Trump demanded that the authorities of Denmark and the European Union hand over or sell the island to the US, to which he received a categorical refusal. To motivate them, Trump introduced another 10% tariffs on goods from a number of European countries, effectively putting a cross over last year's trade deal. The EU is considering the possibility of introducing retaliatory sanctions and tariffs in the near future. Thus, a trade war between the US and the EU has flared up again, sending the dollar lower. Among the day's macro events, note two economic sentiment indices from the ZEW institute (for Germany and the euro area). Both showed high readings, which also helped the euro. Very soon, the price may return to the 1.1800–1.1830 area, which is the upper line of the 1.1400–1.1830 sideways channel.

5M chart of the EUR/USD pair

On the 5-minute TF on Tuesday, two trading signals were formed. In the morning, the pair consolidated above the 1.1655–1.1666 area, which allowed novice traders to open long positions. Literally a few hours later, the target area 1.1745–1.1754 was reached. The rebound from that area could be interpreted as a sell signal, allowing short positions to be opened. They could be closed before the end of the day with a small profit.

How to trade on Wednesday:

On the hourly timeframe, the trend changed to upward. Thus, in the near term, the pair may return to the upper boundary of the 1.1400–1.1830 sideways channel to attempt to break it once more and finally end the seven-month flat. The overall fundamental and macroeconomic backdrop remains very weak for the US dollar, but the daily-TF flat plays take priority, and traders virtually ignore the macro background.

On Wednesday, novice traders can open new long positions if the 1.1745–1.1754 area is broken, targeting 1.1800–1.1830. A bounce of price from the 1.1745–1.1754 area, as it did yesterday, allowed opening shorts targeting 1.1655–1.1666, which can be maintained today.

On the 5-minute TF, consider the levels 1.1354–1.1363, 1.1413, 1.1455–1.1474, 1.1527–1.1531, 1.1550, 1.1584–1.1591, 1.1655–1.1666, 1.1745–1.1754, 1.1808, 1.1851, 1.1908, 1.1970–1.1988. Today, ECB President Christine Lagarde will speak in the euro area; the US events calendar is empty. Events related to Greenland remain on the agenda.

Main rules of the trading system:

1. Signal strength is judged by the time required to form the signal (rebound or breakout). The less time required, the stronger the signal.
2. If two or more trades were opened on false signals near a level, then all subsequent signals from that level should be ignored.
3. In a flat, any pair can generate many false signals or none at all. In any case, at the first signs of a flat, it is better to stop trading.
4. Trades are opened during the period between the start of the European session and the middle of the American session; after that, all trades must be closed manually.
5. On the hourly timeframe, MACD-based signals should ideally be traded only when volatility is high, and a trend is confirmed by a trendline or trend channel.
6. If two levels are located too close to each other (5–20 pips), they should be considered as a support or resistance area.
7. After the price moves 15 pips in the correct direction, place a stop loss at breakeven.

What is shown on the charts:

Support and resistance price levels — levels that serve as targets when opening buys or sells. Take Profit can be placed near them.

Red lines — channels or trendlines that reflect the current tendency and show which direction is preferable to trade now.

MACD indicator (14,22,3) — histogram and signal line — an auxiliary indicator that can also be used as a source of signals.

Important speeches and reports (always listed in the news calendar) can strongly affect a currency pair's movement. Therefore, during their release, trading should be done with maximum caution, or positions should be closed, to avoid a sharp price reversal against the preceding move.

Beginner forex traders should remember that not every trade can be profitable. Developing a clear strategy and effective money management are the keys to long-term trading success.