Review of macroeconomic releases:

No macroeconomic publications are scheduled for Monday. Therefore, market volatility may be quite low today, and traders will have little to react to during the day. That said, the market has recently digested macro releases in a strange, one-sided way. For example, three US inflation reports last week ought to have boosted the dollar but didn't; and over the past month, many reasons for sterling to rise emerged, yet the market often interpreted news in favor of the dollar.

Review of fundamental events:

The only notable fundamental event on Monday is a speech by European Central Bank chief economist Philip Lane. The ECB's stance is clear: there is about a 90% chance the ECB will deliver a third rate hike before year-end, since eurozone inflation continues to accelerate. However, over the past month this factor has not moved the market much. The euro's real chance depends less on the ECB's hawkishness and more on whether the market has become saturated with dollar buying.

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 conflict between Russia and Ukraine could end very soon — a line he has been repeating for nearly two years — and markets have little faith in such optimism. No one is confident either conflict will be resolved before year-end. Trump seeks to end the Ukraine conflict but cannot resolve his own confrontation with Iran; Iran, for its part, hopes for a Republican defeat in the Congressional elections that might reduce US pressure.

Conclusions

On the first trading day of the week, currency pairs may continue to correct, as sellers may finally be satiated. 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.