Analyzing Wednesday's trades:
GBP/USD on 30M chart
The GBP/USD pair finally entered a bearish correction, failing to overcome the level of 1.2544. From our perspective, this is fair and absolutely logical. On Wednesday, the market ignored the disappointing U.S. report on orders for durable goods, which is also fair, as many reports prior to this were interpreted only in favor of the pound sterling. The pound was still rising even in the absence of reports. Therefore, we expect the pair to fall, at least to the ascending trendline. We also expect a decline in the medium term, as we do not believe that the British currency has grounds for long-term growth.
The U.S. released the third report of the day —the University of Michigan Consumer Sentiment Index, which also turned out worse than forecast. Therefore, this report was also likely to trigger the dollar's fall than its rise.
GBP/USD on 5M chart
On the 5-minute chart, several trading signals were generated, and unlike the euro, all of them turned out to be right for the pound. The first sell signal formed overnight did not lead to profit since the price could not reach the level of 1.2488. However, the rebound from the level of 1.2544 during the U.S. session pushed the pair to fall to the level of 1.2457. The rebound from this level signaled the need to close short positions and open long ones. Profit from short positions was about 55 pips. Traders could also make profits since the price managed to rise to 1.2488 by the end of the day. That was another 20 pips.
Trading tips on Thursday:
On the 30-minute chart, the GBP/USD pair has extended its upward movement. But we still believe that it will end soon. Currently, we have an ascending trend line, and overcoming it will allow us to determine the end of the uptrend. The long-awaited decline has finally started, but now it is necessary for it to at least reach the trendline. The key levels on the 5M chart are 1.2052, 1.2089-1.2107, 1.2164-1.2179, 1.2235, 1.2270, 1.2310, 1.2372-1.2387, 1.2457-1.2488, 1.2544, 1.2605-1.2620, 1.2653, 1.2688, 1.2748. Once the price moves 20 pips in the right direction after opening a trade, you can set the stop-loss at breakeven. On Thursday, the UK will release reports on Services and Manufacturing PMIs. These are not crucial reports, but a significant deviation from forecasts can trigger a good movement.
Basic trading rules:
1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, after which all open trades should be manually closed.
5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trendline or trend channel.
6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
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 represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.
The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.
Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.
Beginners should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.
