Trade Analysis for Monday:

1H chart of the EUR/USD pair

The EUR/USD currency pair continued trading lower on Monday. The euro's decline began at the open, as the market this time priced in the start of the war in Yemen and the French budget crisis. In essence, we have been watching the same picture on the FX market for a month: traders find reasons to buy the dollar, act on them, and pay no heed to all factors that would support the euro. Recall that just last week, Eurozone and German inflation reports should have supported the euro. US labor and unemployment reports should have supported the euro. A reduction in hawkish Federal Reserve expectations should have supported the euro. Yet the market continues to ignore all inconvenient factors, so we still view the current movement as inertial, speculative, and illogical. The descending trendline remains relevant despite being breached.

5M chart of the EUR/USD pair

On the 5-minute TF on Monday, a sell signal was generated. During the European session, the price bounced off the 1.1198 level but moved down only about 17 pips. Thus, the short position closed at breakeven by Stop Loss. Another sell signal formed overnight, but that trade closed the same way.

How to Trade on Tuesday:

On the hourly timeframe, EUR/USD continues a downward trend that is now a full-fledged trend. Given all recent events, we do not believe the euro should be falling like a stone. But the market keeps buying the US dollar, ignoring any events or releases.

On Tuesday, novice traders can consider short positions on a close below the 1.1198–1.1218 area with targets of 1.1132–1.1140. Open long positions on a close above the 1.1198–1.1218 area, targeting 1.1267–1.1275.

On the 5-minute TF consider the levels 1.1132–1.1140, 1.1198–1.1218, 1.1267–1.1275, 1.1366–1.1377, 1.1461–1.1474, 1.1527–1.1531, 1.1584–1.1594, 1.1655–1.1665. On Tuesday, the Eurozone will publish retail-sales data, and the US will release the weekly ADP employment report. We view both as secondary and do not expect a market reaction. The US dollar's advance can resume at any moment. Expect euro upside only after a confirmed close back above the trendline.

Key Rules of the Trading System:

1. The strength of a signal is determined by the time it takes to form the signal (rebound or breakout). The less time taken, the stronger the signal.
2. If two or more trades were opened at a certain level based on false signals, all subsequent signals from that level should be ignored.
3. In a range (flat), any pair can generate many false signals or may not produce any at all. Technical levels may be disregarded.
4. On the hourly timeframe, trading signals from the MACD indicator should be acted upon only when volatility is high, and a trend line or trend channel confirms the trend.
5. If two levels are too close together (within 5-20 pips), treat them as a support or resistance area.
6. After moving 15 pips in the right direction, a stop-loss should be set to break even.

What to Look for on the Charts:

Price levels (areas) of support and resistance serve as targets for opening buy or sell trades or as sources of signals.

Red lines indicate channels or trend lines that show the current trend and the preferred trading direction.

The MACD indicator (14,22,3) — the histogram and signal line — is an auxiliary indicator that can also provide signals.

Important speeches and reports (listed in the news calendar) can significantly influence currency pair movements. Therefore, during their release, traders should approach trading with utmost caution, or exit the market to avoid sudden reversals against the preceding move.

Beginner forex traders should remember that not every trade can be profitable. Developing a clear strategy and practicing money management are key to long-term success in trading.