Analysis of the previous deals:
30M chart of the GBP/USD pair
The GBP/USD pair continued its upward movement on Thursday, which began a few days ago. In principle, from the point of view of technical analysis, this movement was quite logical. It was illogical from the point of view of fundamental analysis, since last night the Federal Reserve raised the rate by 0.25% and announced its readiness to raise the rate six more times this year. And any tightening of monetary policy usually supports the national currency. However, nothing of the kind happened on Wednesday, nor did it happen on Thursday at the European session, when the Europeans also had the opportunity to work out the results of the Fed meeting. Everything changed when the Bank of England published its results. Despite the fact that it also raised the rate by 0.25%, and also indicated its intention to fight inflation by tightening monetary policy, the pound fell like a wreck. Losses amounted to 100 points in just an hour. A little later the market began to recover from this fall and at this time the pound/dollar pair is growing again. This is exactly what we warned about earlier: the reaction of the market is not always logical, and yesterday and today we just had the opportunity to see it. All key levels were simply ignored under the onslaught of the foundation.
5M chart of the GBP/USD pair
On the 5-minute timeframe, the technical picture boils down to a collapse of quotes in an hour by 100 points. Prior to this event, a banal upward correction was taking place in the market and not a single trading signal was formed. A buy signal was formed only when the pair reached the level of 1.3193 (which transformed into the level of 1.3210 at the end of the day). But it should not have been worked out, since at that time the price had already gone up from the lows of the day of 70 points. In addition, the results of the Fed meeting were to be published in half an hour, so it was not worth risking all the more. After the collapse, another buy signal was formed when the price overcame the area of 1.3124-1.3134. Formally, this signal could be worked out, although it was formed quite late. However, at that time the market had more or less calmed down, so we could count on a calmer movement. Therefore, 10-20 points could be earned on this deal.
How to trade on Friday:
The pair overcame the descending trend line and continues to move up on the 30-minute TF. However, the movements of the last two days were provoked by two central bank meetings at once, so the current upward trend may be false. In other words, now overcoming the trend line does not mean a change of trend. It is recommended to trade by levels 1.3042, 1.3082, 1.3124-1.3134, 1.3210, 1.3241 on the 5-minute TF tomorrow. When the price passes after the opening of the transaction in the right direction, 20 points should be set to Stop Loss at breakeven. There are no important events or publications scheduled for tomorrow in the UK and America. However, traders may still be under the impression of two meetings at once – the Bank of England and the Fed. Therefore, volatility can remain quite high. We expect that the fall of the British pound may resume. Perhaps the market will receive new data concerning the Ukrainian-Russian conflict, under the influence of which both major pairs have been in the last few weeks.
Basic rules of the trading system:
1) The signal strength is calculated by the time it took to form the signal (bounce or overcome the level). The less time it took, the stronger the signal.
2) If two or more deals were opened near a certain level based on false signals (which did not trigger Take Profit or the nearest target level), then all subsequent signals from this level should be ignored.
3) In a flat, any pair can form a lot of false signals or not form them at all. But in any case, at the first signs of a flat, it is better to stop trading.
4) Trade deals are opened in the time period between the beginning of the European session and until the middle of the American one, when all deals must be closed manually.
5) On the 30-minute TF, using signals from the MACD indicator, you can trade only if there is good volatility and a trend, which is confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 points), then they should be considered as an area of support or resistance.
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.
The MACD indicator (14,22,3) 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 speeches and reports (always contained in the news calendar) can greatly influence the movement of a currency pair. Therefore, during their exit, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
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.
