Analyzing Thursday's trades:
GBP/USD on 30M chart
The GBP/USD pair initially fell, but eventually traded higher on Thursday. At the same time, the EUR/USD pair remained practically unchanged; we came to the conclusion that the pound's movements were triggered by the Bank of England's meeting and not by US data. The BoE raised its interest rate by 0.25% as the market had expected. BoE Governor Andrew Bailey did not provide clear answers to any of the questions during the press conference. He stated that there is no specific plan regarding interest rates and decisions will be based on economic data, while downside risks to the economy have increased. The British pound went through an upward correction, but it was due to the fact that it had been declining for several days and weeks, not due to any hawkish outcomes of the meeting.
The pair has breached the local descending trendline, but we already expected a correction for the pound. We do not consider the BOE meeting results as hawkish, so we do not see reasons for the resumption of an uptrend. However, a bullish correction is still possible.
GBP/USD on 5M chart
Several entry points were formed on the 5-minute chart. If some of them could have been executed during the first half of the day, it was not recommended to trade closer to the US session. In general, we always advise caution when opening positions during the release of important reports or events. On Wednesday, we witnessed how the pair can move during such times. The direction of movement changed several times over the course of a few hours, resulting in potential losses for traders. Therefore, we believe that beginners might have tried to trade only the morning signals. The first signal turned out to be false, while the second one was profitable. Overall, there was no profit or loss.
Trading tips on Thursday:
On the 30-minute chart, the GBP/USD pair continues to trade lower. We cannot say that the technical picture has radically changed this week. The pound can go through a bullish correction, but it is unlikely to result in a new strong uptrend. We support the pound's decline, as we still believe it is significantly overbought and overvalued. The key levels on the 5M chart are 1.2538, 1.2597-1.2605, 1.2653, 1.2688, 1.2748, 1.2801, 1.2848-1.2860, 1.2913, 1.2981-1.2993, 1.3043. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Friday, the UK will release its Construction PMI, while the US is set to publish reports on NonFarm Payrolls, unemployment, and wage data. In the second half of the day, the pair might swing from side to side again.
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.
