Analysis of Friday's Trades

1H Chart of EUR/USD

The EUR/USD pair experienced another sharp decline on Friday, dropping 150 pips in just a few hours. For novice traders, it's important to note that such a significant move within such a short time frame is rare for the euro. This market reaction doesn't usually occur, even after central bank meetings. Friday's plunge in the euro, triggered by the release of PMI data from the Eurozone and Germany, reflects panic-driven market behavior, signaling a flight from the euro.

The euro might rebound slightly or attempt a correction, but the underlying sentiment remains bearish. If the market drops the euro by 150 pips on reports of moderate significance in two hours, it clearly shows a strong bias toward selling the euro. We've been cautioning about this throughout 2024, and the current developments align with our expectations. The first target of 1.0451, which we mentioned previously, has been reached. We believe the euro could fall even further.

5M Chart of EUR/USD

Several trading signals were generated in the 5-minute time frame on Friday, but predicting such a steep drop was nearly impossible. Traders could have entered short positions after breaking through the 1.0433-1.0451 zone, with the first target at 1.0359 reached quickly. However, we wouldn't recommend trading the rebound from this level due to the speed of the bounce (even though the target levels were achieved in this instance).

Trading Strategy for Monday:

In the hourly time frame, EUR/USD has failed to show any significant correction, as the market appears unwilling to buy the euro. While a minor upward retracement is possible (as the weekly chart shows the price reaching the lower boundary of the range we previously discussed), this does not guarantee the start of a correction.

On Monday, we believe the decline could resume from the 1.0433-1.0451 zone as the market continues to signal a strong bearish sentiment.

On the 5-minute TF, the following levels should be considered: 1.0269-1.0277, 1.0334-1.0359, 1.0433-1.0451, 1.0526, 1.0596, 1.0678, 1.0726-1.0733, 1.0797-1.0804, 1.0845-1.0851, 1.0888-1.0896. No significant reports are scheduled for Monday in the Eurozone or the U.S., so the market may pause Friday's sharp decline. However, we advise focusing primarily on sell signals.

Core Trading System Rules:

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 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 Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.

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