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Analysis of Thursday’s deals:
30M chart of the EUR/USD pair
The EUR/USD currency pair fell to the level of 0.9813 on Thursday, which is the approximate low of the previous day, and at the same time a new low for 20 years. Recall that the results of the Federal Reserve meeting were announced on Wednesday evening, which is always very important. Novice traders need to know two basic facts. First, the Fed decided to raise the key rate by 0.75% for the third consecutive time. A rate hike of 0.75% is a “very hawkish” decision, and any hawkish decision by the central bank usually provokes the strengthening of its currency. Secondly, the Fed actually promised to continue tightening monetary policy until inflation shows a significant slowdown. Therefore, in 2022 alone, we can expect two more rate hikes and hardly much lower than 0.75%. This is also a factor in support of the US dollar. Therefore, in principle, we are not surprised by the dollar’s growth on Wednesday and Thursday morning, although we admit that the market could react to it in any manner. It should also be noted that the pair failed to consolidate above the level of 0.9877 on Thursday, which was the nearest resistance level. That is, another attempt to correct it crashed in the bud. We believe that the euro will continue to fall in the medium term.
5M chart of the EUR/USD pair
There was an abundance of trading signals on the 5-minute timeframe. The first signal was formed early in the morning during a rebound from the level of 0.9813, which is Wednesday’s low. After that, the price rose to the level of 0.9910, not reaching it by only 2 points, which is an acceptable error. A rebound from this level should have served as a signal to close long positions and open shorts. Thus, it was possible to earn about 60 points for a long. The sell signal turned out to be less effective, but note that the price almost immediately overcame the level of 0.9877 and never really managed to gain a foothold above it. Consequently, all this time up to the current moment, short positions should have been kept open (because there was simply no signal to buy). Since the price failed to return to the level of 0.9813 before the evening, the position had to be closed manually. Profit was about 40 points more. Thus, beginners managed to earn at least 100 points on Thursday.
How to trade on Friday:
The pair shows that it is ready to continue the fall on the 30-minute timeframe. The Fed meeting provoked only a new fall in the euro, although there were certain options for growth. However, the deteriorating geopolitics has multiplied the effect of another rate hike in the US, so the euro can now safely continue to fall for as long as you like. On the 5-minute TF on Friday it is recommended to trade at the levels of 0.9813, 0.9877, 0.9910, 0.9952, 1.0020-1.0034. When passing 15 points in the right direction, you should set Stop Loss to breakeven. The US and EU business activity indices in the services and manufacturing sectors will be published on Friday, which may be important if they show serious discrepancies with the forecast values. The reaction to them is unlikely to be strong, but it may follow.
Basic rules of the trading system:
1) The signal strength is calculated by the time it took to form the signal (bounce or overcome the level). The less time it took, the stronger the signal.
2) If two or more deals were opened near a certain level based on false signals (which did not trigger Take Profit or the nearest target level), then all subsequent signals from this level should be ignored.
3) In a flat, any pair can form a lot of false signals or not form them at all. But in any case, at the first signs of a flat, it is better to stop trading.
4) Trade deals are opened in the time period between the beginning of the European session and until the middle of the US one, when all deals must be closed manually.
5) On the 30-minute TF, using signals from the MACD indicator, you can trade only if there is good volatility and a trend, which is confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 points), then they should be considered as an area of support or resistance.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14,22,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important speeches and reports (always contained in the news calendar) can greatly influence the movement of a currency pair. Therefore, during their exit, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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