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FX.co ★ Trading plan for EUR/USD on May 6. Simple tips for beginners

Trading plan for EUR/USD on May 6. Simple tips for beginners

Analyzing Friday's trades:

EUR/USD on 1H chart

Trading plan for EUR/USD on May 6. Simple tips for beginners

EUR/USD continued its upward movement on Friday. Last week, there were quite a few important events for the dollar, and the market used them to sell the dollar. It was right about 80% of the time, as almost all of the most significant US reports turned out to be disappointing. The unemployment rate rose, GDP slowed down, the number of Nonfarm Payrolls was much lower than expected, ISM business activity indices fell below 50, and the JOLTs job openings figure fell short of forecasts. Only one event could have boosted the dollar – the FOMC meeting, but the market chose to turn a blind eye to it.

Therefore, the upward trend persists for several consecutive weeks, although initially it was supposed to be a correction. The trend remains intact because the preceding downward movement was stronger. The correction could have ended several times, but the US has released weak macro data for two consecutive weeks, which prevents the dollar from moving higher.

EUR/USD on 5M chart

Trading plan for EUR/USD on May 6. Simple tips for beginners

On the 5-minute timeframe, a very good trading signal was formed during the European session. The price bounced off the 1.0725-1.0733 area, after which it climbed to the 1.0785-1.0797 range. Such movement was supported by dismal US data, but novice traders could set their Stop Loss to break even and calmly observe the situation once the reports were released. However, it was not advisable to use the signal from the rebound from the 1.0785-1.0797 area, as it was difficult to expect the dollar to rise on such weak US data.

Trading tips on Monday:

On the hourly chart, the EUR/USD pair is going through a corrective phase. We believe that the decline should resume in the medium term, as the euro remains relatively high, and in general, the global trend is pointed downwards. The fundamental background still works in favor of the US dollar, and the latest FOMC meeting supports this - now Powell doesn't even know when monetary policy easing will begin.

On Monday, traders may consider selling the pair, as the price rebounded from the 1.0785-1.0797 area on Friday, and the uptrend has persisted for too long. However, overcoming this area will make it possible for traders to reconsider intraday purchases while aiming for 1.0838-1.0856.

The key levels on the 5M chart are 1.0483, 1.0526, 1.0568, 1.0611, 1.0678, 1.0725-1.0733, 1.0785-1.0797, 1.0838-1.0856, 1.0888-1.0896, 1.0940, 1.0971-1.0981. Today, second estimates of Services PMI data in Germany and the EU will be released. These are secondary data that are unlikely to provoke any market reaction.

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.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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