Analysis of Macroeconomic Reports:
Several macroeconomic reports are scheduled for Tuesday. The key report of the day is, of course, the U.S. Consumer Price Index (CPI). Why is it important? At the moment, inflation does not influence the Federal Reserve's stance, as the U.S. central bank, led by Jerome Powell, prefers to wait for the full impact of Donald Trump's tariffs on key indicators of the American economy to materialize. Therefore, regardless of how inflation changes in the U.S., the Fed will remain on hold. However, if inflation increases, it would confirm Powell's stance — that inflation is indeed rising and could strengthen further before the end of 2025. In this case, the likelihood of monetary policy easing this year would decline, which could provide local support for the dollar. In the Eurozone, an industrial production report will also be released today, though only a modest market reaction is expected.
Analysis of Fundamental Events:
On Tuesday, it's important to focus on several key events. Notably, Bank of England Governor Andrew Bailey will be giving a speech. Additionally, Federal Reserve representatives Michelle Bowman, Lorie Logan, and Michael Barr are set to speak shortly after the release of inflation data, and they will likely provide comments on it. It is unlikely that Bailey's or the Fed committee members' positions have changed, so these events are mostly formal in nature.
The trade war remains the primary market focus, and so far, there are no signs of resolution. The situation continues to escalate, as Donald Trump has managed to conclude only three trade deals, one of which is quite questionable. Moreover, the market does not understand what there is to celebrate if all tariffs remain in place. Last week, the U.S. president decided to raise tariffs again for countries that are not rushing to negotiate with Washington (essentially all), while simultaneously increasing import duties on copper, pharmaceuticals, and semiconductors. As we can see, the situation is not improving over time. Therefore, we still see no reason for the dollar to strengthen.
Conclusions:
On the second trading day of the new week, both currency pairs may trade sluggishly, as no important events or reports are scheduled for the day. Technical corrections continue, but could end at any moment. Descending trendlines have formed for both pairs; breaking through these lines would indicate a resumption of the six-month uptrend.
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.
