Analyzing Tuesday's trades:

EUR/USD on 1H chart

EUR/USD tumbled on Tuesday, driven by a single event – the U.S. inflation report. We already warned you that this is a crucial report that could trigger a strong market reaction. So now let's look at the latest values and try to figure out why the market reaction was so pronounced.

Take note that the market still believes in an imminent shift towards a more accommodative monetary policy by the Federal Reserve. Therefore, with each inflation report, the market expects the maximum slowdown. If expectations are not met, the dollar strengthens. U.S. inflation slowed to 3.1%, which essentially met expectations. However, at the same time, core inflation remained unchanged, while the market expected a 0.2% decrease. One could say that the report turned out worse than forecasts (or better, depending on the perspective). As a result, the U.S. dollar sharply strengthened, which aligns with the current technical picture. This implies that the euro will fall further.

EUR/USD on 5M chart

Several trading signals were generated on the 5-minute timeframe, but it was challenging to execute them. The first buy signal formed around the level of 1.0781, but it was not advisable to open a long position, as the inflation report was scheduled to be released in about half an hour. Subsequently, the pair tumbled and breached the area of 1.0767-1.0781, as well as the level of 1.0725. It did so in just 5 minutes, making it very difficult to react to these signals in time. Those who managed to do so earned a good profit.

Trading tips on Wednesday:

On the hourly chart, the downtrend remains intact. We still expect the euro to show a pronounced decline, as the fundamental and macroeconomic background cannot support it at the moment. The latest inflation report supported our statements. Take note that the current decline is not as strong as it could be.

The key levels on the 5M chart are 1.0568, 1.0611-1.0618, 1.0668, 1.0725, 1.0767-1.0781, 1.0835, 1.0896-1.0904, 1.0940, 1.0971-1.0981, 1.1011, 1.1043, 1.1091. The EU will release reports on GDP and industrial production. Both can be considered secondary of importance, although they sound important. There are no significant events planned in the United States.

Basic trading rules:

1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.

2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.

3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.

4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, after which all open trades should be manually closed.

5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trendline or trend channel.

6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.

How to read charts:

Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.

Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.

The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.

Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.

Beginning traders should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.