Analyzing Wednesday's trades:
GBP/USD on 30M chart
GBP/USD did not show any distinct movements on Wednesday. After the price worked around the level of 1.2611 on Tuesday, it did not attempt to either surpass this level or initiate an upward correction. Therefore, it was a flat day, despite the presence of important US economic reports. However, as we mentioned earlier, the reports turned out to be uneventful in terms of values, so they did not provoke any market reaction. Volatility was 40 pips, indicating that the price did not move at all throughout the day. At the same time, the euro continued to fall...
From a technical standpoint, the uptrend has been broken. The price has crossed the trendline but, unfortunately, it failed to surpass the crucial level of 1.2611, which is important for the dollar's future prospects. We shouldn't expect a steady downward movement until the price overcomes this level.
GBP/USD on 5M chart
There were no entry signals on the 5-minute chart. This is not surprising since volatility was just 40 pips. The price repeatedly approached the level of 1.2611 but failed to work it out, even with a slight margin of error. Therefore, we did not see any opportunities to open a trade.
Trading tips on Thursday:
On the hourly chart, GBP/USD broke the trendline and now, for the first time in a long while, has a real chance of forming a new downtrend. We have been waiting for the pound to start a downtrend for several weeks now, so we expect the price to overcome the 1.2611 level. But until it surpasses this mark, the pair will not fall further.
On Thursday, the price may drift away from the level of 1.2611 a little before resuming its decline. It might take a few days before the downward movement is reestablished. The US will release more important reports this week, and if they turn out to be weak, the dollar may postpone its growth once again.
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, 1.2725, 1.2787-1.2791, 1.2848-1.2860, 1.2913, 1.2981-1.2993. December data on the index of business activity in the services sector will be published in the UK and the US. These are secondary data. Besides them, the US will release the ADP report and initial jobless claims. These are not the most important reports either.
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.
