Analyzing Tuesday's trades:
GBP/USD on 1H chart
GBP/USD traded mostly lower on Tuesday, as the price remained within the sideways channel of 1.2611-1.2787. There was no macroeconomic and fundamental background for the British currency, but in the United States, the JOLTs report on the number of job openings for December was released. This report provided significant support to the dollar during the US session, but the growth didn't last long, and the pair quickly bounced back up.
In general, there is nothing to add except that the pair has been in a flat phase for a month and a half. There will be fundamental and macroeconomic events this week that could pull it out of the sideways channel, but they will only start on Wednesday evening. Therefore, in the first half of Wednesday, we can expect the pair to show the same divergent movements within the flat.
The pound has spent the last month and a half near its five-month highs, so it should have started falling by now. However, the market has failed five times to settle below the level of 1.2611. Unless the pair manages to overcome this level, there is no need to dream about further downward movement. However, it is very difficult to expect an upward movement right now since the price can't even overcome the level of 1.2787. The flat persists.
GBP/USD on 5M chart
The movements on the 5-minute timeframe were quite chaotic. The main confusion occurred during the US trading session, but even that could have been competitively traded. The first sell signal formed when the price breached the level of 1.2688. Then it stood still for several hours, returned to 1.2688, and sharply dropped. The decline did not last long, and at the moment, the pound has almost returned to the level of 1.2688. Beginners could only open one short position on Tuesday, as the signals duplicated each other. After a sharp drop during the US session, shorts could be closed, as the pair continues to trade chaotically, and a rebound upward was expected.
Trading tips on Wednesday:
On the hourly chart, GBP/USD is still trading within the sideways channel of 1.2611-1.2787. The price bounced off the level of 1.2611 five times, and is currently moving towards this level again. It has not been able to reach the upper border. On Wednesday, the price can move in any direction.
The British pound will likely remain within the sideways channel, at least until the evening. The price is approaching the lower border of the sideways channel so it can attempt to settle below it for the sixth time, but we can't guarantee that the results of the FOMC meeting will support the dollar, and not the opposite.
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. On Wednesday, there are no important events lined up in the UK. From the US docket, the ADP report on changes in non-farm employment is scheduled for release. Therefore, there's a good chance that the pair will remain within the sideways channel, but in the evening, the results of the FOMC meeting will be announced, which could trigger a dollar rally beyond the sideways channel.
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.
