Analysis of Macroeconomic Reports:
Several macroeconomic reports are set to be released on Friday, but none are deemed particularly significant. In Germany, the inflation report for May will be released, with expectations for the indicator to slow down to 2%. Every new decline in inflation in the EU increases the likelihood of further monetary policy easing by the European Central Bank. However, this pattern currently has no impact on the euro, as the market remains 100% focused on the topic of the Global Trade War. Additionally, Germany will publish a not-so-significant retail sales report.
Three reports will be released today in the U.S., each of which also has very little chance of significantly influencing market sentiment. These include the PCE Price Index, the University of Michigan Consumer Sentiment Index, and personal income and spending reports. We do not expect any noticeable market reaction to these reports.
Analysis of Fundamental Events:
Among Friday's fundamental events, we can note the speeches of Federal Reserve representatives Austan Goolsbee, Raphael Bostic, and Lorie Logan. However, as we have mentioned before, speeches by central bank officials currently do not influence the market since the policy stance and outlook of central banks are already 100% clear, and the market continues to trade solely based on the "Trump factor," as confirmed by yesterday's session. Moreover, many Fed officials have recently voiced their views on the situation and the prospects for monetary policy. In short, the consensus is that the full impact of Trump's tariffs on economic indicators should be expected to appear.
We believe that the market still only cares about the trade war, which, although slowly de-escalating, is still ongoing. The dollar's decline may continue if trade agreements with most countries fail to materialize or negotiations drag on. The dollar could continue to fall even without new tariffs from Trump because the market's attitude toward the U.S. president and his policies remains extremely negative. The International Trade Court decided to block Trump's tariffs, but it reversed its decision by the evening.
Conclusions:
Both currency pairs could resume downward movement during the week's last trading day, as it seems time for a technical correction. At the same time, we see no strong reasons for a prolonged rally in the U.S. dollar. Perhaps the upward trend for both pairs has ended at this stage, as there are no signs of a new escalation in the trade war. However, there are also no real signs of de-escalation. Trading should currently be based on technical analysis.
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.
