What to Watch on January 8th? Analysis of Fundamental Events for Beginners

[Ben Graham]

Analysis of Macroeconomic Reports

Few macroeconomic publications are scheduled for Thursday, and none of them are of major importance. However, we would like to remind you that important reports were released yesterday in both the United States and the European Union, yet they triggered virtually no market reaction. Today, traders will have to make do with entirely secondary reports on unemployment and producer prices in the eurozone, as well as initial jobless claims in the United States. We believe these releases are unlikely to provoke any meaningful reaction from traders.

Analysis of Fundamental Events

No fundamental events are scheduled for Thursday either. In the new year, several members of the FOMC have already made comments, but these remarks are meaningless in the context of Jerome Powell's December stance and the overall position of the Federal Reserve, especially given the lack of new data on unemployment, inflation, and the labor market. Recall that the Fed's position implies a pause in monetary easing at the January meeting, and that throughout the year the key interest rate may be cut only once, as indicated by the latest dot plot chart. Therefore, the stance of individual officials or the Committee as a whole can change only after new Nonfarm Payrolls, unemployment rate, and Consumer Price Index reports are released.

Overall Conclusions

During the fourth trading day of the week, both currency pairs may continue to decline. The euro may do so within the framework of a downward trend, with the British pound following suit. However, we would not recommend ignoring buy signals either, as there have been no new reasons for the dollar to strengthen, and the downward trend in the euro looks very unconvincing.

Basic Rules of the Trading System

1. The strength of a signal is measured by the time required for the signal to form (a rebound from or a breakout of a level). 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 (range-bound) market, any pair may generate many false signals—or none at all. In any case, at the first signs of a flat market, it is better to stop trading.
4. Trades should be opened during the time period from the beginning of the European session until the middle of the U.S. session, after which all trades should be closed manually.
5. On the hourly timeframe, trades based on MACD signals should preferably be taken only when there is good volatility and a trend confirmed by a trendline or trend channel.
6. If two levels are located too close to each other (from 5 to 20 points), they should be treated as a single support or resistance zone.
7. After the price moves 15–20 points in the correct direction, the Stop Loss should be moved to breakeven.

What Is Shown on the Charts

• Price support and resistance levels are levels that serve as targets when opening buy or sell positions. Take Profit levels can be placed near them.
• Red lines represent channels or trendlines that display the current trend and indicate the preferred trading direction.
• The MACD indicator (14,22,3)—histogram and signal line—is an auxiliary indicator that can also be used as a source of trading signals.

Important speeches and reports (always listed in the economic calendar) can strongly influence currency pair movements. Therefore, during their release, trading should be conducted with maximum caution or positions should be closed to avoid sharp price reversals against the prior move.

Beginner forex traders should remember that not every trade can be profitable. Developing a clear strategy and practicing proper money management are the keys to long-term success in trading.

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