Analysis of Friday's Trades

1H Chart of EUR/USD

On Friday, the EUR/USD currency pair continued its downward trend after consolidating below the ascending trendline. Although this downward movement is warranted, the euro could have declined even more over the week. Almost all significant events and reports from the U.S. and the EU favored the U.S. dollar, allowing the euro to hold its position more effectively than anticipated. However, the German data released on Friday were enough to push the euro sharply downward. Retail sales fell by 1.6% month-over-month, compared to a forecast of an increase of 0.2%. The unemployment rate rose to 6.2%, while inflation decreased to 2.3%, against expectations of 2.6%. The unexpected drop in inflation could have triggered a more substantial decline in the euro, as it raises the likelihood that the European Central Bank will swiftly lower the key interest rate to 2%. Meanwhile, the Federal Reserve has paused its easing cycle and plans to maintain this stance for an extended period.

5M Chart of EUR/USD

In the 5-minute timeframe, two perfect trading signals were generated on Friday. First, the price rebounded from the 1.0359 level, then rose to 1.0433 and bounced off that level before eventually returning to 1.0359. Novice traders could have confidently opened long positions initially, followed by short positions. These two trades could have yielded about 90-100 pips in profit.

Trading Strategy for Monday:

On the hourly timeframe, the EUR/USD pair remains in a medium-term downtrend, and the local uptrend has been canceled. As before, we expect the euro to continue declining as the fundamental and macroeconomic factors support the U.S. dollar. Therefore, we anticipate another wave of dollar strengthening soon.

On Monday, a further decline in the pair is expected, but the price must break below the 1.0359 level to confirm this movement. The market has yet to fully react to the ample negative news that supported the euro's fall this week.

In the 5-minute timeframe, consider the following levels for trading: 1.0156, 1.0221, 1.0269-1.0277, 1.0334-1.0359, 1.0433-1.0451, 1.0526, 1.0596, 1.0678, 1.0726-1.0733, 1.0797-1.0804, 1.0845-1.0851. On Monday, manufacturing PMI indices will be released for Germany, the Eurozone, and the U.S. Additionally, the Eurozone will announce its January inflation data, while the U.S. will publish the ISM Manufacturing Index. These two reports are anticipated to have the most significant impact on the movement of the currency pair.

Core Trading System Rules:

1. Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
2. False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
3. Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
4. Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
5. MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
6. Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
7. Stop Loss: Set a Stop Loss to breakeven after the price moves 15 pips in the desired direction.

Key Chart Elements:

Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.

Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.

MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.

Important Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.

Forex trading beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are essential for long-term trading success.