Hourly chart of the GBP/USD pair
The GBP/USD pair continued its weak downward movement on Wednesday, which eventually led to overcoming the upward trend line. Thus, the trend has now changed to a downward one, therefore, short positions have become relevant. We draw your attention to a very remarkable fact: the volatility of the pound/dollar pair was lower today than that of the euro/dollar pair. This is very strange, since it is usually the other way around. Normal daily volatility for the British currency is 80-120 points. For the euro - 60-80 points. But today, as we said, everything was the other way around. Given that both pairs were moving down. As a result, novice traders who opened long positions on yesterday's buy signal received losses worth 15 points. Although yesterday we analyzed the fact that this buy signal was not worth working out, since the candlestick on which it formed was more than 50 points. After such a strong movement for about an hour, it is difficult to count, especially in the evening, just moving in the same direction. The next signal was a sell signal, which was created when the trend line was broken. Traders could enter the market at a price of 1.3869, and the target was the support level of 1.3819, to which the price has not yet reached, although the distance is only 40 points. Thus, according to this trading signal, we recommend to transfer Stop Loss to breakeven. Or close at a low profit.
The UK published an inflation report, which had no effect on the pair's movement. The report turned out to be stronger than the forecast values, so the pound could have grown on Wednesday. But instead, an indistinct downward movement continued. The most interesting thing is that traders did not work out the US retail sales report, since the price dropped 20 points after its release. If 20 points is a reaction to a rather important report, then you don't need to look into the calendar of macroeconomic events at all.
Both the UK and the US will not release a major macroeconomic report on Thursday. Thus, the macroeconomic background will have a very weak impact on the pair's movement. However, the macroeconomic background was present on Wednesday and also had no effect on the pair. Thus, we still rely on technical analysis when making trading decisions.
Possible scenarios on February 18:
1) Long positions have lost their relevance, since the price still crossed the trend line. So now beginners need to wait for a new upward trend or the end of the new downward trend and only after that should you look for new opportunities to open long positions.
2) Novice traders are now advised to consider short positions, as a new downward trend has formed. The last sell signal has not yet been canceled, so it can be left open with an initial target of 1.3819. You can also close it when the MACD indicator turns up or leave it open and set Stop Loss to breakeven.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.
The MACD indicator consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
