What to Pay Attention to on December 18? Analysis of Fundamental Events for Beginners

[Ben Graham]

Macroeconomic Report Analysis:

There aren't many macroeconomic reports scheduled for Thursday, but one on U.S. inflation is highly significant. Recall that the employment data from the U.S. labor market this week has once again proven to be weak and contradictory, suggesting that the Federal Reserve may continue to lean towards making dovish decisions. This is only hindered by the rising inflation seen in recent months. If the Consumer Price Index for November shows a new acceleration, it will be a positive sign for the dollar, as the Fed may then take a prolonged pause on easing monetary policy. However, if inflation slows, the Fed could lower the key rate as early as January, leading the market to aggressively sell the dollar once again.

Analysis of Fundamental Events:

At least two fundamental events are scheduled for Thursday. The European Central Bank meeting garners some interest, although the market does not expect any changes in monetary policy. The only notable point is that Christine Lagarde may hint at a potential rate hike in 2026, which could spur growth for the euro. In contrast, the BoE's meeting is much more significant, as a decision to lower the key rate may be made today, given that inflation has fallen to 3.2%. Additionally, the results of the Monetary Policy Committee's vote on the rate and the BoE's expectations for 2026 will be significant. Thus, there are three major events today that have a "significant" status and could trigger substantial movements in the currency market.

General Conclusions:

On the penultimate trading day of the week, both currency pairs will be influenced by macroeconomic data and fundamental factors. Both pairs can be traded from the nearest technical levels and areas. For the euro, this area is 1.1745-1.1754, and for the pound, it is 1.3319-1.3331. However, it is essential to remember that throughout the day, both pairs may exhibit sharp reversals, and volatility is likely to be high.

Key Rules of the Trading System:

1. The strength of a signal is determined by the time it takes to form the signal (bounce or breakout). The less time it takes, the stronger the signal.
2. If two or more trades were opened near a certain level based on false signals, all subsequent signals from that level should be ignored.
3. In a flat, any pair can form a multitude of false signals or none at all. At the first signs of a flat, it is better to stop trading.
4. Trades are opened during the time between the start of the European session and mid-American session, after which all trades should be closed manually.
5. On the hourly timeframe, using signals from the MACD indicator, it is preferable to trade only when good volatility exists, and a trend is confirmed by a trend line or channel.
6. If two levels are too close to each other (5 to 20 pips), they should be viewed as an area of support or resistance.
7. After moving 15-20 pips in the right direction, a Stop Loss should be set to breakeven.

Chart Explanations:

• Support and Resistance Levels: Levels that serve as targets for opening buys or sells. Take Profit levels can be placed near them.
• Red Lines: Channels or trend lines that reflect the current trend and indicate the preferred direction to trade.
• MACD Indicator (14, 22, 3): A histogram and signal line, a supplementary indicator that can also be used as a source of signals.

Important Note: Significant speeches and reports (always included in the news calendar) can greatly influence the movement of the currency pair. Therefore, during their release, it is advisable to trade cautiously or exit the market to avoid sharp reversals against the preceding movement.

Remember: For beginners trading in the Forex market, it is crucial to understand that not every trade can be profitable. Developing a clear strategy and implementing sound money management are keys to successful long-term trading.

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