Analysis of Macroeconomic Reports:
There are not many macroeconomic publications scheduled for Monday. The only notable release is the ISM Manufacturing Index for the U.S. in July. Other reports are expected to have little significance for the market. It is also worth noting that this week, a significant amount of important data will be released in the U.S., and, for instance, the NonFarm Payrolls report could further reduce the likelihood of the Federal Reserve tightening monetary policy. If the U.S. labor market continues to slow down, the Fed will have to pay attention not only to high inflation but also to the low number of jobs being created.
Analysis of Fundamental Events:
There are no significant fundamental events to note on Monday. No important speeches or events are scheduled for today. However, there is still plenty for traders to ponder. Last week, inflation reports were released in the Eurozone, which maintained a fairly high likelihood of a second increase in the European Central Bank’s key rate. Meanwhile, the U.S. economy slowed in the second quarter, and the Fed did not express a strong desire to raise the key rate anytime soon. Thus, the U.S. dollar, which the market has been buying up for the past few months for various reasons, is losing market support once again.
The geopolitical backdrop continues to leave much to be desired. Another ceasefire has been violated, the conflict has resumed, and the U.S. and Iran have carried out massive strikes for two weeks, with no negotiations taking place at this time. The Strait of Hormuz remains closed, the Yemeni Houthis have declared a blockade on Saudi Arabia, and Tehran threatens to completely shut down the Bab-el-Mandeb Strait if Washington continues to exert pressure. The situation is only heating up, which is driving oil prices higher and, in turn, accelerating inflation.
General Conclusions:
During the first trading day of the week, both currency pairs may correct, and volatility may not be very high today. The euro can be traded from the area of 1.1527-1.1531, and the British pound from the area of 1.3456-1.3476. On Monday, novice traders can focus on technical factors and pay attention to the U.S. ISM index.
Main Rules of the Trading System:
- The strength of the signal is assessed by the time it took 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 certain level based on false signals, all subsequent signals from that level should be ignored.
- In a flat, any pair can form a multitude of false signals or none at all. Technical levels may be disregarded.
- On the hourly timeframe, it is preferable to trade based on signals from the MACD indicator only when there is good volatility and a trend confirmed 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.
