Analyzing Thursday's trades:
GBP/USD on 30M chart
The GBP/USD pair significantly traded higher by the end of Thursday. The pound surged after the Bank of England's recent decision. More precisely, it was influenced by the rhetoric of BoE Governor Andrew Bailey. The BoE has signaled it may not be finished raising interest rates as Bailey warned there was 'still some way to go' and he did not mention a possible easing of monetary policy in 2024. The Federal Reserve said Wednesday it could cut rates at least three times next year, and another rate hike seems increasingly unlikely. Such differences in the rhetoric of the heads of the Fed and the BoE could not go unnoticed by the market. The most logical reaction was to sell the dollar. Therefore, although we advocated for the dollar to strengthen further, we must also acknowledge that Wednesday and Thursday's fundamental background were entirely in favor of the pound.
The US released reports on unemployment benefit claims and retail sales, but they had no impact on the pair's movement. They were simply overshadowed by the meetings of the European Central Bank, the Fed, and the BoE.
GBP/USD on 5M chart
On the 5-minute chart, numerous trading signals were generated. Traders could open long positions in the morning when the price bounced off the level of 1.2611. Afterward, the pair only generated buy signals, except for the rebound from the level of 1.2733. Therefore, beginners had to almost constantly trade upwards and stay in longs. Even the only sell signal turned out to be profitable since the pair reached the nearest target level. In the second half of the day, traders had to be more cautious, so not all signals could be executed. But the movement followed the trend, and the volatility was strong, so everyone had a chance to gain profit.
Trading tips on Friday:
On the hourly chart, the GBP/USD pair has resumed its uptrend. It is very difficult to say how long it will last. After all, the recent growth was provided by the crucial Fed and BoE meetings. Furthermore, the British currency may not have such support. At least, a correction before a new surge will not hurt.
We recommend focusing on the 1.2787-1.2791 range. A rebound from it triggered a correction with 1.2723 as the target. The pair could reach this target on Friday. The pair is unlikely to extend the upward movement for the third consecutive day.
The key levels on the 5M chart are 1.2270, 1.2310, 1.2372-1.2387, 1.2457, 1.2502, 1.2544, 1.2605-1.2611, 1.2688, 1.2723, 1.2787-1.2791, 1.2848-1.2860, 1.2913. On Friday, Services and Manufacturing PMI data will be released in the UK and the US. These are not crucial indicators, and the market may still be under the impression of the results of the central banks' meetings. A pullback down for technical reasons is also highly likely.
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.
