Analyzing Thursday's trades:
GBP/USD on 30M chart
GBP/USD failed to overcome the level of 1.2544 twice, then it bounced off of this mark, and started to correct higher. We believe that after crossing the ascending trendline, the trend changed to a downward one, so any upward movement is considered a correction. The pound did not have any reason to rise on Thursday, as has been the case for most of the past one and a half months. However, corrections and pullbacks are still possible, so technically, it appears logical for the pair to move this way. From macroeconomic reports, we can only highlight the US unemployment claims, the value of which did not differ from forecasts. There were no other reports or events.
Thus, despite the correction, the technical picture has not changed. We still expect the pound to fall, at least to the second ascending trendline, which is visible in the chart above. We expect to see a pronounced decline from the British currency. So as long as the market does not follow the previous momentum, then it seems quite logical for the pound to fall further.
GBP/USD on 5M chart
On the 5-minute chart, two buy signals were generated. The pair bounced off the level of 1.2544 at both times, with perfect precision. In the first case, the price rose by 30 pips, but then it returned back to the level of 1.2544. Therefore, the first long position closed at breakeven on Stop Loss. The second long position brought a profit of 40 pips, as the price reached the target level of 1.2605 and worked it out. Longs should have been closed near this level.
Trading tips on Friday:
On the hourly chart, the GBP/USD pair has finally started to fall, which is currently too weak. We believe that the pound should continue to fall as it simply has no fundamental and macroeconomic reason to justify an upward movement. The pound has increased quite sharply in recent months, and there is no justifiable reason for this, so now it can fall with a clear conscience. The main thing is that the US reports do not spoil the whole picture.
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 Friday, the US will release four important reports, two of which can trigger a strong market movement. There is a possibility that we will see alternating upward and downward movements from the pair, but in any case, volatility will spike, and we will find out whether the November reports that showed weakness in the US economy was in fact a pattern or just a coincidence.
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.
