Friday trade review:

1H chart of the EUR/USD pair

The EUR/USD currency pair continued its local decline on Friday, which wasn't driven by anything specific. First, market movements have been very weak for at least a month and a half, indicating a complete unwillingness of market participants to trade. Second, Thursday's European Central Bank meeting can be considered "hawkish," so it should have at least triggered a small strengthening of the euro. Third, the US inflation report showed unchanged readings compared with July, so in fact there are no more grounds for the Federal Reserve to raise rates in September. It is obvious to all traders that inflation will accelerate again in September, but we doubt this will lead the Fed to tighten monetary policy on Wednesday evening. Nevertheless, the market as a whole is confident in tightening, so the dollar strengthened at the end of last week. Dollar strength will likely continue this week because the market believes the Fed will hike rates. On Wednesday evening, we will find out whether that faith is justified.

5M chart of the EUR/USD pair

On the 5-minute TF on Friday, one buy signal was formed. At the start of the US session, price bounced from the 1.1584–1.1594 area, allowing novice traders to open long positions. By the end of the day, the pair failed to continue the rise and returned to the 1.1584–1.1594 area.

How to trade on Monday:

On the hourly timeframe, the EUR/USD pair can still resume an uptrend. Considering events from recent months, we believe the euro should continue to rise steadily even without local support. The dollar currently has no growth drivers except the market's near-religious belief in a Fed rate hike.

On Monday, novice traders may open short positions targeting 1.1527–1.1531 if the price consolidates below the 1.1584–1.1594 area. Open long positions targeting 1.1655–1.1665 on a bounce from the 1.1584–1.1594 area.

On the 5-minute TF, consider the levels 1.1366–1.1377, 1.1461–1.1474, 1.1527–1.1531, 1.1584–1.1594, 1.1655–1.1665, 1.1745–1.1754, 1.1830–1.1837. On Monday, Christine Lagarde will give another speech in the euro area, while the US calendar is empty. Thus, volatility will again be low today.

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.