Analysis of Thursday's Trades:

1H Chart of the EUR/USD Pair

The EUR/USD currency pair continued its nearly catastrophic decline on Thursday, reaching the support level of 1.1455 by the end of the day. Now, two days after the FOMC meeting, we can draw more or less definite conclusions regarding both the meeting itself and the market's reaction to it. In our view, the situation is complex and ambiguous.

To begin with, the Federal Reserve merely declared its readiness to raise rates by the end of the year, yet the market reacted as if the central bank had implemented an emergency 0.5% rate hike. Let's remember that while the Fed is contemplating policy tightening, the European Central Bank has already begun tightening as of last week. However, the market ignored the rate increase in the Eurozone and reacted with a triple force to the prospective rate hike in the U.S. On Thursday, the European currency had no grounds for decline, and the U.S. dollar had no grounds for growth. Thus, yesterday, we saw the market continue to react to the results of the FOMC meeting and Kevin Warsh's statements. We believe that the market's reaction was excessive and illogical.

5M Chart of the EUR/USD Pair

In the 5-minute timeframe, one excellent sell trading signal formed on Thursday. At the very beginning of the European trading session, the price bounced off the 1.1527-1.1531 area, allowing novice traders to open short positions. A few hours later, the support area of 1.1455-1.1474 was reached, where traders could secure profits.

How to Trade on Friday:

On the hourly timeframe, the downward trend has resumed, but only due to support from the Fed. The U.S. dollar will not receive such gifts every day. With the deal between Iran and the U.S. signed, the market has one less reason to buy the U.S. dollar. Moreover, the Fed is not the only central bank considering rate hikes.

On Friday, novice traders may open short positions targeting 1.1413 if the price settles below the 1.1455-1.1474 area. Long positions can be initiated with targets of 1.1527-1.1531 if the price bounces from the 1.1455-1.1474 area.

On the 5-minute timeframe, levels to consider include 1.1292, 1.1354-1.1363, 1.1413, 1.1455-1.1474, 1.1527-1.1531, 1.1584-1.1594, 1.1655-1.1666, 1.1745-1.1754, and 1.1830-1.1837. On Friday, no significant events are scheduled in either the EU or the U.S., and the market is likely due for a pause and some correction after two days of decline.

Basic Rules of the Trading System:

1. The strength of a signal is determined by the time it takes to form (a bounce or a breakout). The less time it took, the stronger the signal.
2. If two or more trades were opened at a particular level on false signals, all subsequent signals from that level should be ignored.
3. In a flat, any pair can form many false signals or none at all. Technical levels may be ignored.
4. On the hourly timeframe, trading signals from the MACD indicator should be executed only when volatility is good, and a trend is confirmed by a trend line or channel.
5. If two levels are too close together (5 to 20 pips), they should be considered a support or resistance area.
6. After moving 15 pips in the correct direction, a Stop Loss should be placed at breakeven.

What's on the Charts:

Price levels (areas) of support and resistance are targets when opening long or short positions or sources of signals.

Red lines indicate channels or trend lines that display the current trend and indicate the preferred direction for trading.

The MACD indicator (14,22,3) – histogram and signal line – is a supplementary indicator that can also be used as a source of signals.

Important speeches and reports (contained in the news calendar) can significantly impact the movement of the currency pair. Therefore, during their release, trading should be conducted with maximum caution, or one should exit the market to avoid sharp reversals against preceding movements.

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