Analyzing Monday's trades:
GBP/USD on 30M chart
GBP/USD continued its downward movement that started on Friday. The pound's movement differed significantly from the euro's, which was practically in a flat state all day. The pound continued to drift lower, which, from our perspective, is absolutely natural. Recall that last week, the pound traded higher due to two events: the meetings of the Bank of England and the Federal Reserve. Both of these crucial events did not support the dollar, although in the long term, they will not exert pressure on it. In general, we have long been saying that there are no significant reasons for the pound to rise further. Therefore, we fully support its further decline towards the trend line and the level of 1.2502, where the last upward twist began.
On Monday, there was no interesting report or event in the UK and the US, so traders had nothing to react to during the day. Nevertheless, volatility was 70-80 pips, which is pretty good for a "boring Monday". There will be quite a few interesting events this week, but there is almost nothing to pay attention to on Tuesday. Therefore, we expect the pair to reach the level of 1.2611 and a slowdown in the downward movement.
GBP/USD on 5M chart
On the 5-minute chart, two trading signals were generated. First, the pair falsely surpassed the level of 1.2688 upwards, and then it did the same thing but downwards. The first buy signal brought a loss of 20 pips, but the second sell signal brought about 35 pips of profit, as for the rest of the day, the price only fell. The pair did not reach the target level of 1.2611, so the short position could be closed at any time. It was advisable to do this in the evening since there were no signs of a bullish reversal.
Trading tips on Tuesday:
On the hourly chart, the GBP/USD pair has resumed its uptrend, but not for long. On Wednesday and Thursday, the British pound had specific reasons to rise, but it no longer had any of those on Friday and Monday. It is unlikely for the pound to receive any good reasons this week, so it would be logical for the pair to return to the 1.2502 level. Most of the reports this week are unlikely to support the pound.
On Tuesday, we recommend expecting the pair to fall to the area of 1.2605-1.2611. It is up to you whether you wish to work it out in the morning or not. A rebound from this area can provoke a small rise, which can be worked out carefully. But we would not expect a strong rise. You could stay in short positions with 1.2544 as the target when the pair overcomes this area.
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 Tuesday, the UK event calendar is empty. From the US, a secondary report on building permits will be due, which can provoke a reaction of a maximum of 20-25 pips.
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.
