The EUR/USD currency pair on Tuesday continued to be in a limited range all day. In order to easily understand what is happening, we have formed a horizontal channel on the 30-minute timeframe. It is quite formal, but it well illustrates what is happening now in the euro/dollar pair. Thus, we now have the fifth day of the flat. A flat at the lowest point of a downward trend that has formed over the past 15 months. Today's volatility remained quite low, although it was not miserable. However, the problem now is not volatility. The problem is that it is very difficult to trade in a flat: the pair often changes direction, many levels are canceled, as the price ignores them, and false signals are formed. Since the price spends most of the time in the same range, it is very difficult to form support and resistance levels inside it: the price simply overcomes them too often, which deprives them of any meaning. In general, as we have said more than once, it is very difficult to count on profit in a flat. A report on inflation was released in America today, which, as expected, rose to 8.5% y/y. However, this report only provoked a surge of emotions among traders, after which the dollar fell by 50 points. And in the next few hours, it grew by the same amount. Therefore, this important report did not have a special impact on the pair's movement.
On the 5-minute timeframe, the movement also most closely resembles a flat. The price was strictly between the levels of 1.0837 and 1.0905 today. Moreover, the 1.0905 level is the Tuesday high and therefore it did not take part in today's trading. And the 1.0874 level was removed from the chart following today's results, because what happened was what we talked about above - the price overcame it too often. As a result, all trading signals of the day were formed just around the level of 1.0874. First, a sell signal, after which the pair managed to go down "as much as" 12 points. Then a signal to buy, after which the price rose by 16 points. In both cases, the pair did not reach the nearest target level, so both signals are false. In the first case, novice traders failed to set Stop Loss to breakeven, in the second case, it could be done, but the signal itself was formed at the very time when the inflation report was published in America. And the value of this report clearly did not correspond to the fall of the US currency. Thus, the second signal could be completely ignored. Since the first two signals turned out to be false near the level of 1.0874, the third and fourth signals should not have been worked out.
How to trade on Wednesday:
A horizontal channel formed quite unexpectedly on the 30-minute timeframe. Everyone expected that the euro would continue to fall or, at worst, a technical correction would begin, but in practice we got a "flat at the bottom". However, the prospects for the European currency still remain very vague, and we do not see how this currency can show growth in the near future. On the 5-minute TF tomorrow it is recommended to trade at the levels of 1.0727, 1.0806, 1.0837, 1.0905, 1.0938, 1.0966, 1.0989. When passing 15 points in the right direction, you should set Stop Loss to breakeven. On Wednesday, neither the EU nor the US will publish a single important report, not a single important event is planned. Therefore, the probability that the pair will remain in the horizontal channel tomorrow is quite high.
