Trade review for Friday:

1H chart of the EUR/USD pair

The EUR/USD pair on Friday continued attempting to correct after Wednesday's plunge. Price tested the 1.1461–1.1474 support area twice but failed to break it. Thus, an upward correction has not yet begun, but it is brewing. As always, meaningful reasons are required for further dollar strengthening. In recent weeks, traders actively bought the US dollar on expectations of Federal Reserve tightening. Those expectations were met, but what grounds remain for further dollar appreciation? We currently do not see them. The Fed did take a surprisingly hawkish stance last week, which helped the dollar, but overall the situation for the US currency remains more negative than positive. Recall the ECB is tightening policy as well, so monetary policy is not a dollar-only support factor. We believe the dollar has squeezed as much as it can for now, and a new uptrend for the euro could begin. No major events occurred in the EU or the US on Friday.

5M chart of the EUR/USD pair

On the 5-minute timeframe on Friday, one trading signal formed. During the US session, price bounced from the 1.1461–1.1474 area — the second bounce this week from that zone. Thus, this week the euro may be tilting toward gains.

How to trade on Monday:

On the hourly timeframe, EUR/USD continues a downward trend that may now become a full-blown trend. Considering recent months' events, we do not think the euro should collapse like a stone. But the market's primary focus remains Fed policy, which has become materially more supportive of the US currency. However, that factor cannot support the dollar forever.

On Monday, novice traders may open short positions targeting 1.1366–1.1377 if price consolidates below the 1.1461–1.1474 area. Long positions can be opened targeting 1.1527–1.1531 in case of a bounce from the 1.1461–1.1474 area.

On the 5-minute timeframe, consider the levels 1.1267–1.1275, 1.1366–1.1377, 1.1461–1.1474, 1.1527–1.1531, 1.1584–1.1594, 1.1655–1.1665, 1.1745–1.1754. No major events or releases are scheduled in the EU or the US on Monday, so traders will likely have little to react to during the day. Volatility may again be very low.

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.