Analyzing Tuesday's trades:
GBP/USD on 30M chart
GBP/USD traded weakly and struggled at the end of Tuesday. In this case, the situation is becoming more obvious and clear, as the UK released strong economic data in the morning, the nature of which could easily be interpreted unfavorably for the pound. Let's break it down further. The unemployment rate increased (although in line with expectations), while wages rose more than expected, but this does not necessarily mean that the Bank of England will raise rates even more – it just means that inflation will remain high for a longer time. The number of jobless claims turned out to be significantly lower than the market expected, but the first two reports overshadowed it.
Therefore, the pound remains very close to its local lows, and now we have serious doubts about the continuation of the bullish correction. The pair should have corrected for technical reasons and also because the fundamental backdrop was not in the way, but it didn't. The market shows that it is ready to sell.
GBP/USD on 5M chart
On the 5-minute chart, the pair fell notably in the first half of the European trading session, and then it traded in the 1.2457-1.2488 range for the entire day. There was no point in trading between these two levels since the distance between them was just 31 pips. Since there were no consolidations above or below this area, it turns out that there were no trading signals on Tuesday.
Trading tips on Wednesday:
On the 30-minute chart, GBP/USD started to correct higher, but this may end very soon. While movements are currently quite erratic, the downtrend remains notably consistent. This week, the pair may start corrective phases, but overall, we expect it to behave similarly to the EUR/USD pair, which means that we expect it to fall. The key levels on the 5M chart are 1.2307, 1.2372, 1.2457-1.2488, 1.2544, 1.2605-1.2620, 1.2653, 1.2688, 1.2748, 1.2787-1.2791. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Wednesday, the UK will publish reports on GDP (monthly) and industrial production, while the US will release an important CPI report. We do not expect a strong reaction to the British reports, but the US report could cause turmoil in the market.
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.
