FX.co ★ How to Trade the EUR/USD Currency Pair on October 7? Simple Tips and Trade Analysis for Beginners

Trade Analysis for Tuesday:

1H chart of the EUR/USD pair

The EUR/USD currency pair corrected slightly again on Tuesday—and when I say minimally, I mean really minimal. In essence, the euro has not managed a proper correction for a month. All this time EUR/USD has been falling for any and every reason. We therefore continue to conclude the current movement is illogical. Yesterday the macro backdrop was very weak. The market ignored eurozone retail-sales data and the US ADP employment report. That is unsurprising given the past month (or months) in which the market has ignored even more important releases. The descending trendline remains relevant, so there are no grounds yet to expect a sustained rise in the euro. We continue to view the dollar's current strength as illogical, speculative, and technical — something to bear in mind.

5M chart of the EUR/USD pair

On the 5-minute TF on Tuesday, three decent trade signals were formed. During the European session, the pair bounced from the 1.1198–1.1218 support area and rose toward the 1.1267–1.1275 resistance area. Two rejections from that resistance allowed traders to open short positions, and the pair's decline — given the trendline on the hourly-TF — may continue today back to the 1.1198–1.1218 support zone.

How to Trade on Wednesday:

On the hourly timeframe, EUR/USD continues a downward trend that is now a full-fledged trend. Given recent months' events, we do not believe the euro should be falling like a stone. But the market keeps buying the US dollar, ignoring events and releases.

On Wednesday, novice traders can remain in short positions after two bounces from 1.1267–1.1275 with targets at 1.1198–1.1218. Long positions may be opened on a bounce from 1.1198–1.1218 or on a confirmed close above 1.1267–1.1275.

On the 5-minute TF consider the levels 1.1132–1.1140, 1.1198–1.1218, 1.1267–1.1275, 1.1366–1.1377, 1.1461–1.1474, 1.1527–1.1531, 1.1584–1.1594, 1.1655–1.1665. On Wednesday, the eurozone calendar is light; Germany will publish industrial production, and the US will release the minutes of the last Federal Reserve meeting. Remember that Fed minutes are a formality published three weeks after the meeting. Since then, important inflation and labor-market data have come out, so officials' sentiment may already have shifted.

Key Rules of the Trading System:

1. The strength of a signal is determined by the time it takes to form the signal (rebound or breakout). The less time taken, the stronger the signal.
2. If two or more trades were opened at a certain level based on false signals, all subsequent signals from that level should be ignored.
3. In a range (flat), any pair can generate many false signals or may not produce any at all. Technical levels may be disregarded.
4. On the hourly timeframe, trading signals from the MACD indicator should be acted upon only when volatility is high, and a trend line or trend channel confirms the trend.
5. If two levels are too close together (within 5-20 pips), treat them as a support or resistance area.
6. After moving 15 pips in the right direction, a stop-loss should be set to break even.

What to Look for on the Charts:

Price levels (areas) of support and resistance serve as targets for opening buy or sell trades or as sources of signals.

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

The MACD indicator (14,22,3) — the histogram and signal line — is an auxiliary indicator that can also provide signals.

Important speeches and reports (listed in the news calendar) can significantly influence currency pair movements. Therefore, during their release, traders should approach trading with utmost caution, or exit the market to avoid sudden reversals against the preceding move.

Beginner forex traders 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.