Tuesday’s Trade Analysis:
1H Chart of the EUR/USD Pair
The EUR/USD currency pair exhibited very weak upward movement on Tuesday but maintained an overall upward bias, with no significant correction. The macroeconomic and fundamental backdrop was relatively weak. The market paid no attention to the JOLTs report on U.S. job openings for June. It is also worth noting that more and more signals are coming from the Fed indicating that most representatives of the Monetary Committee do not consider it advisable to tighten monetary policy in the near future. Thus, the hawkish sentiment in the market is fading, which does not support the dollar, which has already appreciated on the back of the Federal Reserve’s rate hike. We warned that the Fed might refrain from tightening for several reasons. If the labor market and unemployment data in the U.S. on Friday prove weak, the chances of a rate hike from the Fed in 2026 will decrease further.
5M Chart of the EUR/USD Pair
On the 5-minute timeframe, no trading signals were formed on Tuesday. During the American trading session, the price interacted with the area of 1.1527-1.1531, but the movements were so weak that this interaction cannot be called a “bounce.” Therefore, we would expect a trading signal to form in the indicated area today.
How to Trade on Wednesday:
On the hourly timeframe, the price has exited the sideways channel it had spent a month in and is now forming a new upward trend. Considering all the events in the world in recent months, we believe that the European currency should continue its steady growth. Recently, the market has diligently ignored almost all favorable factors for the euro, so a “mutual settlement” may now begin, adjusting the exchange rate to fair value.
On Wednesday, novice traders may open short positions with targets of 1.1461-1.1474 if the price consolidates below the 1.1527-1.1531 area. Long positions will become relevant in the event of consolidation above the 1.1527-1.1531 area, with targets of 1.1584-1.1594.
On the 5-minute timeframe, the following levels should be considered: 1.1267-1.1275, 1.1366-1.1377, 1.1461-1.1474, 1.1527-1.1531, 1.1584-1.1594, 1.1655-1.1666, and 1.1745-1.1754. On Wednesday, there are no important events or publications planned in the Eurozone. At the same time, in the U.S., the ADP labor market report and the ISM services sector activity index will be released. The ADP report can be considered secondary, while the ISM index is important.
Main Rules of the Trading System:
- The strength of the signal is determined by the time it takes to form the signal (bounce or level breakthrough). The less time required, the stronger the signal.
- If two or more trades are opened around a level based on false signals, all subsequent signals from that level should be ignored.
- In a flat, any pair can generate a multitude of false signals or none at all. Technical levels may be disregarded.
- When trading based on MACD signals on the hourly timeframe, it is advisable to do so only when volatility is high and the trend is supported by a trend line or channel.
- If two levels are too close to each other (from 5 to 20 pips), they should be regarded as a support or resistance area.
- After a 15-pip move in the correct direction, a Stop Loss should be set to break even.
What the Charts Show:
Support and resistance price levels (areas) are the targets when opening buy or sell orders or sources of signals.
Red lines denote channels or trend lines that reflect the current trend and indicate in which direction trading is currently favored.
The MACD indicator (14,22,3) – histogram and signal line – is a supporting indicator that can also be used as a source of signals.
Important speeches and reports (as listed in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be approached with utmost caution, or one should exit the market to avoid sharp price reversals against the preceding movement.
Beginners in Forex trading should remember that not every trade can be profitable. Developing a clear strategy and proper money management are essential for long-term trading success.
