Analysis of Tuesday's deals:
30M chart of the GBP/USD pair
The GBP/USD pair also fell on Tuesday. It could hardly be otherwise, since the US inflation report had the same relation to both major pairs. Thus, we saw the same movement. At the end of the day, the price settled below the ascending trend line. It took the pound four full days to climb 320 points up and half an hour to fall 200 points down. By the way, we would also like to pay attention to the abnormally strong reaction of the market to the inflation report. 200 points in half an hour is the distance that the pound travels several times a year, usually after strong fundamental events, such as a central bank rate hike. Immediately, the inflation report cannot be considered as disappointing, it cannot be called discouraging. It turns out that the market all the time before the report simply drove the pair higher, so that later it would be happy to start selling it. Thus, we were right when we warned that the downward trend could still resume. At this time, all the trump cards are again in the hands of the US dollar. Maybe the bulls will still be able to push the pair up a bit, but now we would say that the probability of the resumption of the one and a half year downtrend is 95 percent. Considering the British statistics, which turned out to be quite good, even somehow does not make sense...
5M chart of the GBP/USD pair
It can be seen on the 5-minute timeframe that the pound was growing in the first half of the day. One would think that this is a reaction of the market to good reports on unemployment and wages in the UK, only the euro was also growing at the same time. Moreover, the pound's growth was clearly short-lived. A blatant flat began around the level of 1.1716. Formally, consolidation above this level happened, but it happened half an hour before the release of the inflation report in the US, so a long position definitely should not have been opened. Then a collapse began, within which it was suicidal to try to open positions. If a sell signal had been formed a couple of hours before the release and traders were already in short positions and had the opportunity to set Stop Loss to breakeven, then it would be a different matter. But the pair's movements did not allow such an option to be realized. Therefore, all the signals that followed after the inflation report should have been ignored.
How to trade on Wednesday:
The pound/dollar pair has consolidated below the rising trend line on the 30-minute time frame, so now a downward trend has formed again. The market may still work out the inflation report in the US tomorrow, so you need to be prepared for the fact that the fall will continue. The pound may return to a downward peak in just four days after the beginning of what was supposed to be a new upward trend at the time. On the 5-minute TF on Wednesday it is recommended to trade at the levels of 1.1411, 1.1443, 1.1498, 1.1550, 1.1608, 1.1648, 1.1716, 1.1755. When the price passes after opening a deal in the right direction for 20 points, Stop Loss should be set to breakeven. The release of the inflation report is scheduled for Wednesday in the UK. Another mega-important report that can provoke serious movements in the market. There will be no important events and reports in the US, but Tuesday's inflation report, coupled with Wednesday's, may be enough.
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 US 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.
