Analysis of Macroeconomic Reports:
There are a few macroeconomic releases scheduled for Friday, but all of them are highly important. Let's begin with the Consumer Price Index (CPI) in the Eurozone. Just six months ago, this figure was of great importance to traders and the euro, but that is no longer the case. Inflation in the EU has "stabilized" around 2% and now shows only minor fluctuations near the European Central Bank's target level. As a result, inflation currently does not influence the monetary policy of the ECB.
In contrast, today in the U.S., we have labor market and unemployment reports, which are crucial for the Federal Reserve, and as a bonus, the ISM Manufacturing PMI. We may once again see significant volatility during the U.S. trading session.
Analysis of Fundamental Events:
There are no notable fundamental events on Friday, but they are not needed today. There are no questions regarding the monetary policies of the ECB, Bank of England, or Fed – everything is proceeding exactly as representatives of all three central banks have repeatedly stated. The market, however, often bets on alternative scenarios, but that's the market's problem – it either doesn't understand or doesn't want to listen to Jerome Powell, Christine Lagarde, and Andrew Bailey.
At the top of the market's agenda remains the trade war, which changed form on Monday. We continue to believe that any trade deal that retains tariffs is still a trade war, just "under a different label." Deals like the one made with the EU or Japan are beneficial for the U.S. Therefore, each new similar agreement may provoke further strengthening of the U.S. dollar. However, on a global and fundamental level, the market will continue to factor in the new trade architecture and Donald Trump's protectionist policy. In our view, this is not a suitable foundation for long-term dollar growth. Hence, we are still only dealing with a downward correction on the daily timeframe.
Conclusions:
During the final trading day of the week, both currency pairs may once again experience substantial volatility. For the euro, we highlight the levels of 1.1413 and 1.1455 as potential entry points for market positions, and for the pound, the 1.3203–1.3211 area. However, once the U.S. session begins, technical analysis will take a back seat. If traders have open positions by that time, it is advisable to move Stop Loss orders at least to breakeven.
Key Rules for the Trading System:
- 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 15–20 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 speeches and reports, which are consistently featured in the news calendar, can significantly influence the movement of a currency pair. Therefore, during their release, it is advisable to trade with caution or consider exiting the market to avoid potential sharp price reversals against the prior trend.
Beginners in the Forex market should understand that not every transaction will be profitable. Developing a clear trading strategy and practicing effective money management are crucial for achieving long-term success in trading.
