What to Pay Attention to on February 20? Analysis of Fundamental Events for Beginners

[Ben Graham]

Analysis of Macroeconomic Reports:

There are quite a few macroeconomic reports scheduled for Friday. In Germany, the UK, and the Eurozone, business activity indices for the services and manufacturing sectors for February will be released. If the data do not contradict each other and align with forecasts, the market's reaction could be quite significant. Additionally, the UK will publish a report on retail sales. In the US, traders should focus primarily on the fourth-quarter GDP report (preliminary estimate) and the core personal consumption expenditures (PCE) price index, which is relevant to inflation—an aspect the market seemed to overlook last week. We continue to believe that the current declines in the euro and the pound are not closely linked to the macroeconomic backdrop.

Analysis of Fundamental Events:

Among the fundamental events on Friday, only the speech of Federal Reserve representative Raphael Bostic can be highlighted. After the US labor market, unemployment, and inflation data were released, we anticipated a shift in the rhetoric from members of the Fed's Monetary Committee; however, the first speeches from officials indicated a continued "neutral" stance. We believe the Fed's stance may shift toward a more "dovish" approach soon, as US inflation is approaching 2%. However, inflation must continue to decelerate rather than simply remain around 2.4%. To summarize, there is currently no evidence of intensifying "dovish" sentiment, but this does not explain the two-week rise of the US currency.

General Conclusions:

On the last trading day of the week, the market may see quite active trading due to numerous reports being released today. The euro can be traded today in the range of 1.1745-1.1754, while the British pound can be traded in the range of 1.3437-1.3446. We still see no grounds for strong, sustained growth in the US currency, but the trends for both currency pairs remain downward.

Main Rules of the Trading System:

1. The strength of the signal is determined by the time it takes to form (rebound or breaking through the level). The shorter the time, the stronger the signal.
2. If two or more trades were opened around a particular level based on false signals, all subsequent signals from that level should be ignored.
3. In a flat market, any pair can generate numerous false signals or no signals at all. In any case, it is best to stop trading at the first signs of a flat.
4. Trades are opened during the time period between the start of the European session and until the middle of the American session, after which all trades should be manually closed.
5. On the hourly timeframe, signals from the MACD indicator should ideally be traded only when there is good volatility and a trend confirmed by a trend line or channel.
6. If two levels are too close to each other (ranging from 5 to 20 pips), they should be considered as a support or resistance area.
7. After moving 15-20 pips in the correct direction, it is advisable to set the Stop Loss to break-even.

What's on the Charts:

• Support and resistance levels are targets for opening buy or sell trades. Take Profit levels can be placed around them.
• Red lines indicate channels or trend lines that reflect the current trend and indicate the preferred direction for trading now.
• The MACD indicator (14,22,3) – the histogram and signal line – serves as a supplementary indicator that can also be used as a source of signals.
• Important speeches and reports (always found in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be conducted with maximum caution, or it is advised to exit the market to avoid a sharp price reversal against the preceding movement.
• Beginners trading in the Forex market should remember that not every trade can be profitable. Developing a clear strategy and practicing sound money management are the keys to long-term trading success.

The material has been provided by InstaForex Company - www.instaforex.com