Analysis of Macroeconomic Reports:

Very few macroeconomic publications are scheduled for Tuesday, and none are important. Germany, the Eurozone, and the UK will publish construction-sector PMI indices today, which attract little interest. The Eurozone will also release a slightly more important retail-sales report. In the US, the weekly ADP report is due, which has almost no significance because even its monthly variation is generally ignored by traders. In any case, the macroeconomic backdrop now exerts only a very weak influence on FX pricing.

Analysis of Fundamental Events:

Among Tuesday's fundamental events are speeches by Federal Reserve FOMC members Michelle Bowman and Lorie Logan, as well as remarks from European Central Bank officials. ECB representatives may toughen their rhetoric on key rates soon because September inflation accelerated more than expected. However, this information is unlikely to help the euro, since the market has already ignored ECB tightening twice. Speeches by US central bankers, by contrast, may be considerably softer because core PCE did not accelerate in August and the labor market again produced disappointing results. Yet even that information is unlikely to put sustained pressure on the US dollar.

The geopolitical backdrop still leaves much to be desired, though it is not clearly worsening. The US and Iran are not conducting official negotiations at the moment, while Donald Trump continues to insist a deal could be signed after the US Congressional elections. The market does not believe in such a rosy outcome. Over the weekend, it became known that Yemen launched a military operation against the Houthis, and the Houthis continue to strike Saudi oil and gas facilities and tankers. Thus tensions in the Middle East are heating up again.

General Conclusions:

On the second trading day of the week, currency pairs can continue to decline calmly, since the move no longer depends on fundamentals, geopolitics, or macroeconomics. The euro can be traded today from the 1.1198–1.1218 area, and the pound sterling from the 1.3175–1.3180 and 1.3259–1.3267 areas. Volatility today may 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, a stop-loss should be set 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.