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12.05.2025 06:51 AM
What to Pay Attention to on May 12? A Breakdown of Fundamental Events for Beginners

Analysis of Macroeconomic Reports:

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There are no macroeconomic events scheduled for Monday. Fundamental developments will also be limited, but at this point, it is entirely unclear which factors are influencing price formation. The pound and the euro had reasons to fall on Wednesday and Thursday. However, the euro's decline was brief, and the pound sterling, under pressure from the Bank of England and the Federal Reserve, still failed to break out of its sideways channel. As a result, technical analysis currently takes precedence.

Analysis of Fundamental Events:

There is still little point in discussing any fundamental events aside from Trump's trade war, but news is scarce even on that front. The escalation of the trade war is on pause, while Trump continues to announce trade agreements without providing any details. The dollar's decline could resume if Trump begins imposing new tariffs or raising existing ones. Any escalation could lead to another drop in the dollar, while any de-escalation could strengthen it.

This past week, the U.S. president announced a trade agreement with the United Kingdom, so the dollar should have gained against its rivals due to this factor as well. It's worth recalling that if the dollar has previously fallen on news of escalation, it should rise on news of de-escalation. Therefore, any trade deal should support the U.S. currency. However, the market is more interested in deals with China and the EU, where no progress has been made in the negotiation process.

Representatives of the BoE, the Fed, and the European Central Bank will also give speeches on Monday. However, the BoE and Fed held their meetings this past week, while the ECB conducted its meeting a week earlier. The stance of all three central banks is clear at this point.

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General Conclusions:

On the week's first trading day, both currency pairs may trade in either direction. The euro will likely continue its gradual decline, while substantial gains in the U.S. dollar remain challenging to anticipate. The pound sterling remains trapped in a sideways channel, meaning its movements could be largely random.

Key Rules for the Trading System:

  1. Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
  2. False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
  3. Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
  4. Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
  5. MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
  6. Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
  7. Stop Loss: Set a Stop Loss to breakeven after the price moves 15–20 pips in the desired direction.

Key Chart Elements:

Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.

Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.

MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.

Important speeches and reports, which are consistently featured in the news calendar, can significantly influence the movement of a currency pair. Therefore, during their release, it is advisable to trade with caution or consider exiting the market to avoid potential sharp price reversals against the prior trend.

Beginners in the Forex market should understand that not every transaction will be profitable. Developing a clear trading strategy and practicing effective money management are crucial for achieving long-term success in trading.

Paolo Greco,
Analytical expert of InstaForex
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