Analyzing Thursday's trades:
GBP/USD on 30M chart
GBP/USD showed very strange movements on Thursday, or rather, it was being illogical again. To make things simple, the Bank of England raised the interest rate by 0.5% after slowing down its pace a couple of months ago. This was a highly unexpected move. Even when the inflation report was released and it turned out to be completely disappointing, very few people seriously expected to see a 0.5% rate hike. Nevertheless, the BoE did it, and the pound, which had previously been rising for various reasons, ended the day lower. What's noteworthy here is that the pound dives following the surprising rate hike. And it happened on the very day when it had an excellent opportunity to rally. Therefore, we reiterated that the pound is trading illogically and remains overbought.
The ascending trendline maintains the current trend, and the pair has been trading between the levels of 1.2698 and 1.2860 for a week. However, it seems reluctant to correct further. At the moment, the pound may continue to rise due to the BoE's aggressive policy, but we won't be surprised if it starts to enter an extended downward movement.
GBP/USD on 5M chart
Speaking of trading signals, the situation was quite difficult. The first signal materialized a couple of hours before the BoE announced the results of its meeting, so it was very risky to execute it. After the results, the pair started to fluctuate back and forth, so it didn't make sense to trade any signals. The last sell signal - consolidation below the 1.2772 level - was completely illogical since the 0.5% rate hike indicated the pound's growth, not its decline. If beginners executed it, they could have made several tens of points of profit, but we wouldn't advise doing so.
Trading tips on Friday:
As seen on the 30M chart, the pair continues its uptrend in the short term. There is no need to talk about any logic in the movements now as the pound is still heavily overbought and continues to rise for no reason. The key levels on the 5M chart are 1.2457, 1.2499, 1.2538, 1.2597, 1.2629, 1.2698, 1.2772, 1.2860, 1.2913, 1.2981. When the price moves 20 pips in the right direction after opening a trade, a stop loss can be set at breakeven. On Friday, June PMIs for the services and manufacturing sectors will be released in the UK and the US. The UK will also publish a retail sales report. If the values of these reports deviate significantly from the forecasts, there may be a reaction, but it is unlikely to be significant.
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.
