Analyzing Monday's trades:
GBP/USD on 1H chart
The GBP/USD pair edged down on Monday. There were no interesting events or reports that could provoke a market reaction, or at least serve as background. The downtrend persists, as shown by the descending trendline. However, this trend is quite formal, as the pair has not shown a firm decline for over two weeks. As mentioned earlier, the pair is moving sideways. While the pound is expected to fall to the level of 1.2502, and we generally expect a downward movement, the market isn't eager to sell the pound.
Today, Bank of England Governor Andrew Bailey and some of his colleagues are scheduled to speak. We believe that the main reason why the pound is not showing a steady downward movement is because the market still has hawkish expectations regarding the BoE's interest rates for 2024. If Bailey softens the hawkish sentiment, then we can expect a fall in the demand for the pound.
GBP/USD on 5M chart
The movements on the 5-minute timeframe were very weak, but at least the pair still moved. Two trading signals were formed. Initially, the pair bounced off the 1.2605-1.2611 area but managed to rise by only 5 pips. Later, it overcame the mentioned area and fell by 13 pips. In both cases, it was not possible to set a Stop Loss to breakeven due to the extremely weak movements. Nevertheless, it was possible to earn about 10 pips from the second trade (if anyone entered the market) by closing it manually closer to the evening. There were no other options.
Trading tips on Tuesday:
On the hourly chart, GBP/USD left the sideways channel of 1.2611-1.2787 and is making every effort to start a downtrend. However, it is not going well. Both an ascending trendline and a descending one can be formed on the hourly timeframe. There is no clear trend. In the medium-term, we expect the pound to exhibit a downward movement, but now it depends on the market. There is no basis for drawing conclusions about a possible rise in the British currency.
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. Today, Bailey is scheduled to speak. This event is extremely important because it is the only event on Tuesday. The U.S. macroeconomic calendar is empty.
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.
