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04.12.2022 02:34 PM
How to trade EUR/USD on December 5. Simple trading tips and analysis for beginners

Analyzing Friday trades:

EUR/USD on 30M chart

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EUR/USD just showed paradoxical movements on Friday. Basically, all of the main movements were provoked by the NonFarm Payrolls report in the U.S. However, to start with, let's remember the fact that we have been talking about the European currencies' unreasonable growth for two consecutive weeks now. Or more precisely, about how the dollar's decline is unjustified. I have pointed out numerous times that the euro and pound are rising even when they should be falling, given the fundamental or macroeconomic background. And on Friday, we could once again see the validity of this conclusion. The NonFarm Payrolls report, despite the ADP report, turned out to be very strong, much stronger than expected. And on the surface it made sense, as the dollar was immediately up 100 points or so. But by the end of the day it had fallen by the same 100 points, so the whole effect of the report's payoff was offset. So it turns out that the U.S. dollar was falling again when it should have been rising, and rising strongly at that. This is exactly what we have been talking about for the last two weeks. The market is reacting in a completely inadequate manner towards macroeconomics and fundamentals, so no logical moves are in sight right now.

EUR/USD on M5 chart

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As for Friday's trading signals, the situation was quite complicated. The price moved along the level of 1.0535 for the entire European trading session, and after the Nonfarm report was published the currency plunged in just 15 minutes. There were several sell signals at the European session, and eventually they could be quite profitable, as the pair fell 100 pips. The only question is, did novice traders keep their short positions at the time when the report was released? This was followed by a buy signal near the level of 1.0433, which could not be worked out. As well as all the subsequent signals. The fact is that US reports were quite strong, so it was impossible to expect the dollar's fall (i.e. growth of the pair). Profit depended on just one short position at the time when the report was released.

Trading tips on Monday:

The uptrend has been canceled on the 30-minute time frame, but it may resurface. The pair is gravitating towards growth, but there is no ascending trend line anymore. The current movement is more like a "swing", so we can expect strong movement in either direction. On the 5-minute chart tomorrow, it is recommended to trade at the levels of 1.0354, 1.0391, 1.0433, 1.0465-1.0483, 1.0535, 1.0582-1.0607, 1.0636, 1.0663, 1.0697. As soon as the price passes 15 pips in the right direction, you should set a Stop Loss to breakeven. On Monday, the EU will release business activity and retail sales reports, and European Central Bank President Christine Lagarde will deliver another speech. The U.S. will also publish a business activity report, especially ISM. So, there might be some market reaction to some of these events. But will it be logical or will the dollar go down all day again?

Basic rules of the trading system:

1) The strength of the signal is determined by the time it took the signal to form (a rebound or a breakout of the level). The quicker it is formed, the stronger the signal is.

2) If two or more positions were opened near a certain level based on a false signal (which did not trigger a Take Profit or test the nearest target level), then all subsequent signals at this level should be ignored.

3) When trading flat, a pair can form multiple false signals or not form them at all. In any case, it is better to stop trading at the first sign of a flat movement.

4) Trades should be opened in the period between the start of the European session and the middle of the US trading hours when all positions must be closed manually.

5) You can trade using signals from the MACD indicator on the 30-minute time frame only amid strong volatility and a clear trend that should be confirmed by a trendline or a trend channel.

6) If two levels are located too close to each other (from 5 to 15 pips), they should be considered support and resistance levels.

On the chart:

Support and Resistance levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.

Red lines are channels or trend lines that display the current trend and show in which direction it is better to trade now.

The MACD indicator (14, 22, and 3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend patterns (channels and trendlines).

Important announcements and economic reports that can be found on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.

Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time.

Paolo Greco,
Analytical expert of InstaForex
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