Trade Review of Tuesday:

1H Chart of the EUR/USD Pair

The EUR/USD pair fell again on Tuesday, but once more within the sideways channel. As we expected, the US inflation report triggered a strong market reaction, but that report was not enough for EUR/USD to leave the sideways channel. Regarding the market's reaction to the US consumer-price index, it again looked quite strange. On the one hand, the dollar's rise on inflation accelerating above forecasts is unsurprising, since formally the Federal Reserve should now adopt a more hawkish stance than before. On the other hand, we only saw a monthly report, and in December the Fed will raise the policy rate anyway — regardless of the inflation print. Thus, if the euro intended to make another attempt to complete the downtrend, it failed again. For more than a month, the pair has traded strictly sideways, and the euro still cannot properly correct after its two-month decline.

5M Chart of the EUR/USD Pair

On the 5-minute timeframe, two trading signals were generated on Tuesday. Just before the start of the European session, the price bounced off the 1.1198–1.1218 area and showed a small rise. At the start of the US session, the price consolidated below 1.1198–1.1218 and showed a decent decline, which could have been taken as profit closer to the evening by closing a short position manually.

How to Trade on Wednesday:

On the hourly timeframe, the EUR/USD pair retains a downtrend that is a full-fledged trend, and remains flat between 1.1114 and 1.1267. The euro still has not corrected properly in recent weeks, but a chance for an upward trend remains. Considering all the events of recent months, we do not believe the euro had to fall like a stone. At the moment, the dollar is heavily overbought, and a large number of euro-positive factors are being ignored.

On Wednesday, novice traders can remain in short positions or open new shorts on a bounce from the 1.1198–1.1218 area with a target of 1.1104–1.1114. Long positions can be opened after a close above 1.1198–1.1218 with a target of 1.1267–1.1275.

On the 5-minute timeframe consider the levels 1.1011, 1.1104–1.1114, 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 Wednesday, there are no important events or releases scheduled in either the eurozone or the US. Only Germany will publish the second estimate of October inflation, which is unlikely to interest traders.

Main rules of the trading system:

1. Signal strength is judged by how long the signal took to form (a bounce or a breakout). The less time required, the stronger the signal.
2. If two or more false signals have been generated around a given level, all subsequent signals from that level should be ignored.
3. In a flat (range), any pair can produce many false signals or none at all. Technical levels can be ignored.
4. On the hourly timeframe, ideally trade MACD signals only when volatility is strong, and a trendline or trend channel confirms the trend.
5. If two levels are placed very close to each other (5–20 pips), treat them as a support/resistance area.
6. After a price moves 15 pips in the intended direction, move the Stop Loss to breakeven.

What is shown on the charts:

Price levels (areas) of support and resistance — levels that serve as targets when opening longs or shorts or as sources of signals.

Red lines — channels or trendlines that display the current trend and indicate the preferred trading direction.

MACD indicator (14,22,3) — histogram and signal line — an auxiliary indicator that can also be used as a source of signals.

Important speeches and reports (listed in the news calendar) can strongly affect a currency pair's movement. Therefore, when they are released, one should trade as cautiously as possible or step aside to avoid a sudden price reversal against the prior direction.

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