Review of macroeconomic releases:

Several macroeconomic releases are scheduled for Tuesday, but few are truly market-moving—first and foremost, note UK unemployment and wages data. The Eurozone and Germany will publish the ZEW economic-sentiment indices, while the US will release housing starts and building permits. In our view, the market is most likely to react only to the UK data— and even that reaction could be muted. Inflation data remain the primary focus for traders, and over the past month traders largely ignored many UK and eurozone releases. If the market has finished its baseless dollar buying, the euro and pound could rise even without supportive fundamentals.

Review of fundamental events:

Tuesday features speeches by Bank of England officials Megan Greene and Sasha Mills. The BoE meeting is two weeks away and is likely to deliver another rate hike, as UK inflation is rising similarly to the US and eurozone. Therefore, both the European Central Bank and the BoE are expected to tighten, while the Federal Reserve has pushed its next likely move out toward December.

The geopolitical backdrop remains worrying. The US and Iran are not holding official talks at present, although Donald Trump continues to insist a deal could be signed after the US Congressional elections. Trump also repeatedly claims the Russia–Ukraine conflict could end very soon — a claim he has made for almost two years — and markets have little faith in such optimism. Neither conflict is likely to be resolved before year-end. Trump seeks to end the Ukraine conflict but cannot resolve his standoff with Iran; Iran is counting on a Republican defeat in the Congressional elections to reduce US pressure.

Conclusions

On the second trading day of the week, currency pairs may continue to rise as there is a possibility that the bears have finally had enough of selling. Trade the euro today from the 1.1198–1.1218 area and the pound from the 1.3319–1.3331 area. Volatility is expected to be low.

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, set a stop-loss 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.