14.08.202407:07 Forex Analysis & Reviews: Key events on August 14: fundamental analysis for beginners

Analysis of macroeconomic reports:

A few macroeconomic events are scheduled for Wednesday, but all of them are extremely important. Novice traders should focus solely on the inflation reports from the UK and the U.S. This is relatively straightforward. Given the market's inclination to sell the dollar, any decline in U.S. inflation greater than forecasts could trigger a new dollar collapse. Conversely, a stronger-than-expected British inflation reading might boost the pound, as it would delay the second rate cut by the Bank of England.

In addition to these reports, the Eurozone will release the second estimate of GDP for the second quarter and industrial production data. However, today, the market will focus on the inflation reports.

Analysis of fundamental events:

There is nothing to highlight from Wednesday's fundamental events, but they are not needed today. Important data will be published in the European Union, the UK, and the U.S., giving the market enough information to base trading decisions.

General conclusions:

On the third trading day of the week, the fate of both currency pairs will entirely depend on the UK's and the U.S.'s inflation reports. The stronger the inflation rise in Britain, the greater the chance for the pound to show new growth, as the BoE would likely pause at the next meeting. The greater the fall in U.S. inflation, the higher the likelihood of a new dollar collapse, as the probability of a Federal Reserve rate cut in September would increase even further.

Basic rules of a trading system:

1) The strength of a signal is determined by the time it took for the signal to form (bounce or level breakthrough). The shorter the time required, the stronger the signal.

2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be ignored.

3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, it's better to stop trading at the first signs of a flat market.

4) Trades should be opened between the start of the European session and mid-way through the U.S. session. All trades must be closed manually after this period.

5) In the hourly time frame, 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 are too close to each other (from 5 to 20 pips), they should be considered as a support or resistance zone.

7) After moving 15 pips in the intended direction, the Stop Loss should be set to break-even.

What's on the charts:

Support and Resistance price levels: targets when opening long or short positions. You can place Take Profit levels near them.

Red lines represent channels or trend lines that depict the current trend and indicate the preferred 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 source of signals.

Important 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 effective money management, is key to long-term success in trading.