Analyzing Tuesday's trades:
GBP/USD on 30M chart
The GBP/USD pair traded mostly higher on Tuesday. In the morning, important unemployment reports were published in the UK, which turned out to be better than projected. In the second half of the day, the US inflation report was released, which added pressure on the dollar as inflation fell more than expected, reducing the likelihood of further monetary tightening by the Federal Reserve in 2023. Therefore, the uptrend persists, and the pair bounced off the ascending trendline from a day earlier. Hence, the pair's growth was quite logical.
The British currency continues to rise both with reasons and without. Despite the justified growth on Tuesday, we still believe that the pound is positioned too high and should decline.
GBP/USD on 5M chart
Three trading signals materialized on the 5-minute chart, but only one was valid. At the very beginning of the European trading session, the pair formed a buy signal around the level of 1.2538, and GBP climbed to the target level of 1.2597. The pair rebounded from that level, and a sell signal formed when the US inflation report was published. Therefore, the long position should have been closed regardless, but there was no need to rush with shorts. Firstly, because there was a significant resistance area above. Secondly, because the nature of the inflation report supported the pair's growth, not its decline. Therefore, trades should have no longer been opened, and the first one resulted in a profit of about 30 pips.
Trading tips on Wednesday:
As seen on the 30M chart, the GBP/USD pair started a new uptrend in the short-term. For now, the upward movement is not particularly strong, but the pound is still rising while, for example, the euro is barely moving. The rationale behind the pound's growth raises many questions. The key levels on the 5M chart are 1.2245, 1.2307, 1.2372, 1.2457, 1.2499, 1.2538, 1.2597-1.2616, 1.2659, 1.2697, 1.2772. When the price moves 20 pips in the right direction after opening a trade, a stop loss can be set at breakeven. On Wednesday, GDP and industrial production reports are set to be published in the UK. Both aren't that important, so the reaction to them may be weak or there could be none at all. In the US, there will be the less significant Producer Price Index, and in the evening, the Federal Reserve's meeting minutes, which can provoke strong market volatility.
Basic trading rules:
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 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 do not produce any 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 read charts:
Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels 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.
Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.
