Analysis of Thursday's deals:
30M chart of the GBP/USD pair
The GBP/USD pair showed almost the same movements as the EUR/USD pair on Thursday. It did not fall in the European trading session, and mainly moved sideways. But at the US session, the same "rise" followed, as for the euro/dollar pair, by 260 points. Thus, traders worked out the inflation report identically for both pairs. The pound sterling also formed a new ascending trend line. Recently, we have reiterated that there are no grounds for a strong and long-term growth of the pair, but today they really were, as the rapid fall in inflation in the US means that the Federal Reserve rate may stop rising in the near future. And this is a bearish factor for the dollar. Albeit ambiguous. The question now is how much more the dollar will fall after a single report this week. We still think it won't last long, but now we have a trend line to help with the end of an upward trend.
5M chart of the GBP/USD pair
On the 5-minute timeframe, there were no trading signals in the European session. The pair approached the level of 1.1356 several times, but each time did not reach it by at least 6 points, which cannot be considered an "error". When the US session started and the inflation report was released, the pair shot up so fast that we saw a 90-point gap. It means that the pair instantly rose by 90 points. Naturally, all the signals that were formed on the way to 1.1648 should have been ignored, since it was simply impossible to work them out in time. Such movements happen 10-12 times a year, so you need to work very hard to have the ability to work them out. The price could well have collapsed in the same way, since no one knew the value of the inflation report in advance.
How to trade on Friday:
The pound/dollar pair resumed growth on the 30-minute TF, but there were good reasons for this. Now it will be very interesting to see how much more the pair will be able to rise. Friday morning there will be interesting data from Great Britain, so both the volatility and the trend may persist. On the 5-minute TF, it is recommended to trade at the levels 1.1356, 1.1435, 1.1479, 1.1550, 1.1608, 1.1648, 1.1716, 1.1755, 1.1793, 1.1863- 1.1877. When the price passes after opening a position in the right direction for 20 points, Stop Loss should be set to breakeven. The release of GDP and industrial production is scheduled for Friday in the UK. In America - only a minor index of consumer sentiment from the University of Michigan. We do not expect a strong reaction to the British statistics, but a weak reaction may be.
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 positions 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 positions are opened in the time period between the beginning of the European session and until the middle of the US one, when all positions 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.
