22.02.202403:35 Forex Analysis & Reviews: Key events on February 22: fundamental analysis for beginners

Analysis of macroeconomic reports:

There's a full plate of macroeconomic events slated for Thursday compared to the last three days. The economic calendar was basically empty in the first three days of the week. On Thursday, investors will look to the release of the manufacturing and services PMI prints from the eurozone, Germany, the US, and the UK. We would like to remind you that the US has its "own" business activity indices – ISM. They are much more important for the market and the dollar. However, in the absence of reports and news, even this data can affect the movement of both currency pairs.

The same goes for the German, EU and UK business activity indices. Normally, we would expect a reaction of 20-30 pips, which is not much. But now 20-30 pips is more than half of the daily volatility of the EUR/USD pair. Therefore, under the current circumstances, the market may show a strong reaction to these reports. The US will release another report on initial jobless claims, and the EU will publish the second estimate of inflation for January. If there are no deviations from the previous estimate (which rarely happens), there should be no market reaction to this report.

Analysis of fundamental events:

The day will be packed with fundamental developments, but all of them are secondary of importance. In the US, representatives of the Federal Reserve's monetary committee, Patrick Harker and Neel Kashkari, will speak. They can share interesting information with the market, but even without this, it is now clear that the market's dovish expectations for the Fed's monetary policy are cooling. Bostic and Bowman spoke on Wednesday, and as we can see, their speeches did not provoke any market movements. All because representatives of any central bank rarely make really loud statements.

General conclusion:

Thursday sees no important events. However, PMI data can provoke more or less noticeable movements in the market. Simply because there are no other reports this week. At the same time, we do not expect strong movements from both currency pairs. The euro may continue its sluggish corrective movement, and the pound may remain within a sideways channel.

Basic rules of a trading system:

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.

Beginners 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.