Trade review for Tuesday:

1H chart of the EUR/USD pair

The EUR/USD pair continued downward on Tuesday and lost another roughly 120 pips over the past four days for no particularly good reason. After a month-long drop of about 600 pips, we expected a more meaningful correction, but the market keeps refusing to buy the euro as if it were some risky currency. Yesterday, the market had a formal reason to buy the dollar: the U.S. durable-goods report surprised to the upside, adding to dollar strength that had already been building before the release. In short, the euro is falling again—on macro data, without data, on expectations of Federal Reserve tightening, on expectations about the European Central Bank, and basically for any reason. Tonight the Fed meets and will not raise rates, but the dollar can still rally on the event — even though traders spent the last four days buying the dollar regardless.

5M chart of the EUR/USD pair

On the 5-minute timeframe, two modest trade signals formed on Tuesday, and later that evening price bounced off the 1.1198–1.1218 area, enabling short positions that could carry into Wednesday. The target area 1.1132–1.1140 was reached. The rebound from that area failed to produce a strong recovery, and the subsequent close below it suggests the decline may continue today.

How to trade on Wednesday:

On the hourly timeframe, EUR/USD retains a downward tendency that is a full-fledged trend. The euro still has not produced a proper correction. Given recent months, we do not believe the euro should have fallen so steeply. The dollar is heavily overbought, and many euro-bullish factors are being ignored.

On Wednesday, novice traders can remain in short positions if the pair holds below the 1.1132–1.1140 area, targeting 1.1088. Consider buying on a confirmed move above the 1.1132–1.1140 area, with targets of 1.1198–1.1218.

On the 5-minute TF consider the levels 1.1011, 1.1088, 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. The Fed meets on Wednesday, and other events are largely immaterial. The Fed is almost certain (99% probability priced in) to hold the key rate, but the market may still find hawkish cues in Kevin Warsh's words. Right now, the dollar rises on any excuse.

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.