Analysis of Wednesday's trades:
30M chart of GBP/USD
On Wednesday, like in the previous three days, GBP/USD mostly traded in the sideways channel between 1.2980 and 1.3049. Just by the close of the trading day, the pair was able to consolidate above 1.3049. Notably, the greenback plunged during the North American session. There were two possible reasons for the fall. Firstly, the pound bounced off the important level of 1.2980, which is also the 15-month low. Therefore, it could have been a technical move. Secondly, the dollar could have dropped after the release of a report on oil stocks change in the US. Of course, this is just in theory because such results usually never affect the American currency. Anyway, oil inventories grew by 9.4 million barrels, exceeding market expectations of 1.1 million. One way or another, the pair again failed to break through 1.2980. That is why we may see GBP showing growth for other several days.
5M chart of GBP/USD
In the M5 time frame, the quote traded sideways on Wednesday. The first three buy signals were formed in the 1.2981-1.2993 range. We should analyze the first signal more closely as it was a mixed one. It was made approximately at the same time the UK inflation report came out. The rate accelerated to 7.0% in March, exceeding market forecasts. In response, the pound went down. However, it did not last long. The price fell slightly below 1.2981, which could have been interpreted as a sell signal. As a reminder, the greenback strengthened a day earlier when inflation data was published in the US. Clearly, the higher the inflation, the greater the chance of a rate hike by the Fed, and the better for the dollar. Therefore, the pound should have increased and not fallen. Anyway, at the moment GBP consolidated below 1.2981, it had already gone down by 46 pips. Volatility has been low lately. That is why just three signals were to be considered. As soon as the price bounced off 1.2993 for the second time, the pair retraced up by 20 pips and then returned to 1.2993. Trades were closed by Stop Loss at the breakeven point. The third buy signal should not have been worked out, since the possibility of a trend movement was low. Nevertheless, those who opened trades after the third signal were able to earn a profit of several tens of pips.
Trading plan for Thursday:
In the 30M time frame, the pair left the sideways channel on Wednesday. In this light, the pound may show growth for a while. Yet, the quote is unlikely to rise above 1.3107 as there have been no reasons for that. A 75-pip increase on Wednesday seems to be a rather strong move. On Thursday, the target levels in the 5M time frame are seen at 1.2913, 1.2981-1.2993, 1.3042-1.3049, 1.3102, 1.3156, and 1.3210. A stop-loss order should be set at the breakeven point as soon as the price passes 20 pips in the right direction after a trade has been opened. The UK will see no macro events unfolding on Thursday. Meanwhile, the US will see the release of several reports, which are unlikely to somehow affect the market.
Basic principles of the trading system:
1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal.
2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to the Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored.
3) During the flat trend, any currency pair may form a lot of false signals or produce no signals at all. In any case, the flat trend is not the best condition for trading.
4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually.
5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel.
6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.
How to interpret charts:
Support and resistance levels can serve as targets when buying or selling. You can place Take Profit near them.
Red lines are channels or trend lines that display the current trend and show which direction is better to trade.
MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines.
Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, 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.
Beginner traders should remember that every trade cannot be profitable. The development of a reliable strategy and money management is the key to success in long-term trading.
