Analysis of Wednesday's Trades
1H Chart of EUR/USD
On Wednesday, the EUR/USD currency pair continued its upward movement. Essentially, we are seeing the same pattern every day this week — the dollar continues to fall, as expected after the price consolidated above the descending trendline. During the first three days of the week, there were no major macroeconomic releases at all. And yet, traders continue to sell off the U.S. dollar.
At the beginning of the week, Donald Trump announced that he intends to raise tariffs on the European Union to 30% if Brussels fails to sign a trade deal. Some might argue that this announcement triggered the new wave of dollar depreciation. However, let us remind you that in the past three weeks, Trump has increased tariffs effective August 1 for 24 countries and also announced new duties on copper and pharmaceuticals. Therefore, the EU tariffs are not the only reason for the dollar's weakness — or perhaps not the main one. Yesterday, Trump also announced a trade deal with Japan. The market's response to this news is visible across the charts.
5M Chart of EUR/USD
On the 5-minute timeframe, three trading signals were formed on Wednesday, but daily volatility was extremely low. The first two sell signals near the 1.1740–1.1745 area allowed the dollar to strengthen by 15 pips. The last buy signal led to a 20-pip appreciation of the euro. Thus, technically, the signals were not false, but profiting from them was very difficult.
Trading Strategy for Thursday:
On the hourly timeframe, EUR/USD appears to have completed its corrective movement, which lasted for three weeks. Since Trump's policy has not changed recently, and the conflict with Powell and the trade war have intensified, we still see no reason for the dollar to strengthen in the medium term. The trendline has been broken, so a new upward leg for the euro is likely.
On Thursday, the EUR/USD pair may continue moving upward, as the important level of 1.1666 and the trendline have been breached. A new ascending trendline has formed. A continuous stream of news from the U.S. is encouraging market participants to sell the dollar further.
On the 5-minute chart, focus on the following levels: 1.1198–1.1218, 1.1267–1.1292, 1.1354–1.1363, 1.1413, 1.1455–1.1474, 1.1527, 1.1563–1.1571, 1.1655–1.1666, 1.1740–1.1745, 1.1808, 1.1851, 1.1908.
On Thursday, business activity reports are scheduled for release in the Eurozone, Germany, and the U.S., along with the European Central Bank meeting as a bonus. These events may trigger market reactions, but are unlikely to reverse the dollar's current downtrend.
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.
