Analyzing Monday's trades:
GBP/USD on 30M chart
GBP/USD fell by approximately 100 pips on Monday, but this nearly had no impact on the overall technical picture. Over the past week, the price has tightly consolidated between the levels of 1.2620 and 1.2725, essentially forming a sideways channel. Yesterday, there was an attempt to settle below the 1.2620 level, but it was weak, and the pound quickly moved back up. The ascending trendline was broken, opening certain prospects for further decline, but the pound is currently showing strong resistance against the dollar. We still expect a downward movement, but the market is not in a hurry to sell.
There were no fundamental or macroeconomic events yesterday. The market had nothing to react to, but nevertheless, we still witnessed a decent decline in terms of volatility. Therefore, the market will likely find a reason to be active today. The pound is overbought and excessively expensive, so we continue to expect a downward movement.
GBP/USD on 5M chart
Several signals were generated on the 5-minute chart. The first sell signal was formed overnight around the 1.2688 level, and traders could execute it when the European session opened. At the junction of the European and U.S. sessions, another sell signal was formed around the 1.2688 level. At least one of these signals should have been executed. Subsequently, the price started the expected movement and reached the area of 1.2605-1.2620, where shorts should have been closed. The profit was about 55 pips.
Trading tips on Tuesday:
On the hourly chart, the GBP/USD pair continues an uptrend, and we still believe that it will end soon. We are starting to see signs of the uptrend coming to an end, and the pound has no reason to rise further. The U.S. will release a good number of reports this week, so the dollar's fate will depend on it. If they turn out to be weak again, there's a possibility that both the euro and the pound may rise. But in the case of the pound, it will look strange if it starts an uptrend without a bearish correction, and also if we take note of all the upward movement of the past couple of weeks.
The key levels on the 5M chart are 1.2270, 1.2310, 1.2372-1.2387, 1.2457-1.2488, 1.2544, 1.2605-1.2620, 1.2688, 1.2723, 1.2787-1.2791, 1.2848-1.2860. On Tuesday, the UK will release a relatively minor report on Services PMI data (second estimate). From the U.S., traders will keep an eye on the crucial ISM Non-Manufacturing PMI, as well as the ADP Nonfarm Employment Change report. Therefore, we expect traders to be active in the second half of the day.
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.
