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05.05.2025 04:15 AM
What to Pay Attention to on May 5? A Breakdown of Fundamental Events for Beginners

Analysis of Macroeconomic Reports:

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Very few macroeconomic events are scheduled for Monday. The only noteworthy release is the ISM Services PMI from the U.S., but serious doubts exist about whether the market will pay attention to it. Most of the macroeconomic background was ignored by the market this past week. It's also worth remembering that the currency market is closed over the weekend, so no macro data is released. However, Donald Trump doesn't take weekends off, so we may expect new disruptive decisions or high-profile statements from him, which the market will have to react to on Monday.

Analysis of Fundamental Events:

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There's no point in discussing fundamental factors other than Trump's trade war, although that war appears to be on pause for now. The dollar's decline could continue indefinitely if Trump introduces new tariffs or raises existing ones. Any escalation could lead to a renewed dollar selloff, while de-escalation could strengthen it. The U.S. president has begun to shift his rhetoric toward China in a more conciliatory direction, but this isn't yet a true de-escalation. Knowing Trump, it wouldn't be surprising if he raised tariffs again.

Donald Trump understands that further tariff hikes could destroy the U.S. economy, so a new escalation is unlikely in the near term. At the same time, no trade deal talks with China are taking place, which means the punitive tariffs of "145% - 125%" remain in force. We already saw on Wednesday how the U.S. economy reacted to Trump's trade policies.

General Conclusions:

On the first trading day of the new week, both currency pairs could move in either direction. EUR/USD may remain sideways, so a bounce from the 1.1275 level could trigger a new upward move. The British pound continues to show a stronger desire to rise but has declined for four days. The macroeconomic background is unlikely to influence trader sentiment with about 90% certainty. For trading, one can rely only on technical levels—which, unfortunately, are also not always respected by traders.

Key Rules for the Trading System:

  1. Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
  2. False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
  3. Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
  4. Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
  5. MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
  6. Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
  7. Stop Loss: Set a Stop Loss to breakeven after the price moves 15–20 pips in the desired direction.

Key Chart Elements:

Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.

Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.

MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.

Important speeches and reports, which are consistently featured in the news calendar, can significantly influence the movement of a currency pair. Therefore, during their release, it is advisable to trade with caution or consider exiting the market to avoid potential sharp price reversals against the prior trend.

Beginners in the Forex market should understand that not every transaction will be profitable. Developing a clear trading strategy and practicing effective money management are crucial for achieving long-term success in trading.

Paolo Greco,
Analytical expert of InstaForex
© 2007-2025
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