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19.01.2024 05:24 AM
Key events on January 19: fundamental analysis for beginners

Analysis of macroeconomic reports:

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There will be few macroeconomic events on Friday, and none of them will be particularly important. The UK will release a retail sales report, nothing significant in the European Union, and US reports on new home sales and the University of Michigan Consumer Sentiment Index will be released. As we can see, all these reports are of secondary importance. Therefore, market reaction to them may be very weak or even absent altogether.

Thursday was a good example of this. The US released three secondary reports but even if all these data had good values for the US dollar, the currency gained a maximum of 20-30 pips before quickly losing all the gains. Therefore, we do not expect strong movements on Friday. The euro will likely extend its downtrend, while the pound is expected to remain in a sideways channel.

Analysis of fundamental events:

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There are hardly any fundamental events on Friday. Of course, the key event of the day will be European Central Bank President Christine Lagarde's speech, who has already spoken twice this week. In both cases, her rhetoric was not particularly resonant, but she did mention that the European Central Bank could start easing its monetary policy closer to summer. The euro has already started to lose fundamental market support as the market was expecting a later start to the interest rate cut cycle.

In the United States, Mary Daly will give a speech on Friday, but it will take place during the night and will not have any impact on the dollar's movement during the day.

General conclusion:

We can consider Lagarde's speech as the key event of the day. There is a possibility that she will repeat the phrase about the possible start of the easing cycle earlier than the beginning of summer, which may exert pressure on the euro. As for the pound sterling, fundamentals and macroeconomics are completely irrelevant as long as the price remains within the sideways channel of 1.2611-1.2787.

Basic rules of a trading system:

1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.

2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.

3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.

4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, after which all open trades should be manually closed.

5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trendline or trend channel.

6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.

How to read charts:

Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.

Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.

The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.

Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.

Beginners should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.

Paolo Greco,
Especialista em análise na InstaForex
© 2007-2024
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