Analysis of Macroeconomic Reports:
A substantial number of macroeconomic publications are scheduled for Thursday. In Germany, reports on GDP for the second quarter and inflation will be released. In the Eurozone, GDP and unemployment reports are expected. In the US, the Personal Consumption Expenditures (PCE) price index and reports on GDP for the second quarter, along with personal spending/income data for the American population, will be published. Of course, GDP reports attract attention; however, we would like to draw traders’ focus to the inflation report in Germany. It is expected that inflation will rise from 2.3% to 2.7% for July. Thus, it can be assumed that inflation will also rise in the Eurozone and other countries worldwide during this period, as oil prices have risen again. This brings central banks closer to tightening monetary policy in September, particularly the European Central Bank.
Analysis of Fundamental Events:
Among the fundamental events on Thursday, the Bank of England meeting is notable. Inflation in the UK continues to decline, so there is no chance that the British central bank will take a hawkish stance. It may even adopt a dovish stance, which could lead to a decline in the British currency. Essentially, everything will depend on Andrew Bailey’s statements and the Monetary Committee’s voting results on the rate. Yesterday, the dollar fell due to the insufficiently hawkish tone from the Fed, and today the British pound may fall for the same reason.
The geopolitical backdrop continues to leave much to be desired. Another ceasefire has been broken, the conflict has resumed, and the US and Iran have conducted heavy bombardments for two weeks, with negotiations currently not taking place. The Strait of Hormuz remains closed, Yemeni Houthis have declared a blockade of Saudi Arabia, and Tehran threatens to completely shut the Bab-el-Mandeb Strait. The situation is only escalating over time, provoking high oil prices.
General Conclusions:
During the penultimate trading day of the week, the European currency may continue to move within the sideways channel of 1.1366-1.1474 but may trend towards the lower boundary. The British pound will aim to maintain the emerging upward trend. The euro can be traded today from the area of 1.1461-1.1474, while the British pound can be traded from the area of 1.3319-1.3331. Volatility for both currency pairs may be high throughout the day.
Basic Rules of the Trading System:
- The strength of a signal is evaluated based on the time it takes to form (bounce or breakout). The less time required, the stronger the signal.
- If two or more trades were opened at a particular level based on false signals, all subsequent signals from that level should be ignored.
- In a flat market, any pair may generate many false signals or none at all. Technical levels may be overlooked.
- On the hourly timeframe, trading signals from the MACD indicator should be executed only when volatility is good, and a trend line or channel confirms a trend.
- If two levels are too close together (5 to 20 pips), they should be considered a support or resistance area.
- After moving 15 pips in the correct direction, a Stop Loss should be set at breakeven.
What’s on the Charts:
Price levels (areas) of support and resistance are targets when opening long or short positions or sources of signals.
Red lines indicate channels or trend lines that display the current trend and indicate the preferred direction for trading.
The MACD indicator (14,22,3) – histogram and signal line – is a supplementary indicator that can also be used as a source of signals.
Important speeches and reports (contained in the news calendar) can significantly impact the movement of the currency pair. Therefore, during their release, trading should be conducted with maximum caution, or one should exit the market to avoid sharp reversals against preceding movements.
Beginners trading in the forex market should remember that not every trade can be profitable. Developing a clear strategy and practicing money management are key to long-term success in trading.
