FX.co ★ How to Trade the EUR/USD Currency Pair on August 31? Simple Tips and Trade Analysis for Beginners

Trade Analysis of Friday:

1H Chart of the EUR/USD Pair

The EUR/USD currency pair showed a fairly confident decline during Friday's trading, which can be explained in various ways. Firstly, the price previously broke the ascending trend line earlier in the week. Formally, this signals a trend change to bearish, so the decline in the pair's quotes is logical. Secondly, there was a speech by Kevin Warsh on Friday, which the market once again interpreted as "hawkish" and as a signal of future tightening of the Federal Reserve's monetary policy. In our view, this is not the case, but Warsh's remarks on inflation could be interpreted that way. Thirdly, the annual Nonfarm Payrolls report showed a much less bad value than it could have, which the market also interpreted as a positive fact. Thus, three formal factors helped the dollar rise on Friday. We want to emphasize that the current decline of the pair is a correction, and there are still almost no strong reasons for the dollar to rise. However, after overcoming the trend line, the pair may show growth for some time.

5M Chart of the EUR/USD Pair

On the 5-minute timeframe, two trading signals were formed on Friday. The first one appeared during the Asian trading session in the form of a rebound from the area of 1.1655-1.1665. Thus, novice traders could open short positions in advance. In the American trading session, this signal was replicated, and a few hours after its formation, the pair fell to the nearest support area of 1.1584-1.1594.

How to Trade on Monday:

On the hourly timeframe, the EUR/USD pair began a correction after a month of growth. Taking into account all the events of recent months, we believe that the European currency should continue its steady growth even without local support. The American currency currently has no factors for growth, so we continue to expect upward movement.

On Monday, novice traders may consider short positions targeting 1.1527-1.1531 if price settles below the 1.1584-1.1594 area. Long positions can be opened in case of a rebound from the area of 1.1584-1.1594 with a target of 1.1655-1.1665.

On the 5-minute timeframe, the following levels should be considered: 1.1366-1.1377, 1.1461-1.1474, 1.1527-1.1531, 1.1584-1.1594, 1.1655-1.1665, 1.1745-1.1754, 1.1830-1.1837. On Monday, there are no significant events or publications scheduled in the Eurozone or the US. In Germany, the inflation report for August will be published today, which is the only significant event of the day.

Main Rules of the Trading System:

1. The strength of the signal is determined by the time it takes to form the signal (bounce or level breakthrough). The less time required, the stronger the signal.
2. If two or more trades are opened around a level based on false signals, all subsequent signals from that level should be ignored.
3. In a flat, any pair can generate a multitude of false signals or none at all. Technical levels may be disregarded.
4. When trading based on MACD signals on the hourly timeframe, it is advisable to do so only when volatility is high and a trend line or channel supports the trend.
5. If two levels are too close to each other (from 5 to 20 pips), they should be regarded as a support or resistance area.
6. After a 15-pip move in the correct direction, a stop-loss should be set to break even.

What the Charts Show:

Support and resistance price levels (areas) are the targets when opening buy or sell orders or sources of signals.

Red lines denote channels or trend lines that reflect the current trend and indicate in which direction trading is currently favored.

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

Important speeches and reports (as listed in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be approached with utmost caution, or one should exit the market to avoid sharp price reversals against the preceding movement.

Beginners in Forex trading should remember that not every trade can be profitable. Developing a clear strategy and proper money management are essential for long-term trading success.