Analyzing Thursday's trades:
GBP/USD on 1H chart
GBP/USD also showed negative trades on Thursday. It was even possible to form a descending channel, which currently supports the bears so we can also hope that the pound falls further. Remember that we are expecting a pronounced decline from the British currency. Initially, the pound rose for three months without any justifiable reason, then it stood flat for three months. We believe that now is the time to start a strong downward trend, but, of course, everything will depend on the market sentiment. If investors refrain from buying the dollar, as they ignore the fundamental and macroeconomic background, then the pair will not start a downward movement.
Yesterday, the US Producer Price Index supported the dollar. Although we don't consider this report important, yesterday it still showed significant value. Experts expected the index to rise by 0.3%, but in reality, it increased by 0.6%. Thus, the timing of the first Federal Reserve rate cut is pushed even further.
GBP/USD on 5M chart
Several signals were generated on the 5-minute timeframe, but they were all spoiled by an unnecessary rebound from the area of 1.2787-1.2791 at the beginning of the US session. By the way, the market's initial reaction to the US reports was to buy the pair, not sell it. As a result, we had two rebounds from the area of 1.2787-1.2791, both of which were false signals. After that, a strong sell signal was formed, and the price fell by 40 pips. The first trade did not bring profit, it closed at breakeven using a Stop Loss. The second signal should not have been executed, as it was formed precisely during the release of the data. The third signal should not have been executed either, as the first two turned out to be false signals.
Trading tips on Friday:
On the hourly chart, GBP/USD has finally started to move downward. Since the pound doesn't have any logical reason to rise further, we encourage the British currency's decline. However, it is extremely difficult to confirm whether the market has turned firmly bearish based on just two trading days. Therefore, the pound can still trade higher.
The key levels on the 5M chart are 1.2372-1.2387, 1.2457, 1.2502, 1.2544, 1.2605-1.2611, 1.2648, 1.2691, 1.2725, 1.2787-1.2791, 1.2848-1.2860, 1.2913, 1.2981-1.2993. On Friday, there are no important events planned in the UK. The US docket will feature reports on industrial production and consumer sentiment. The dollar has a good chance of rising today, as long as these reports do not show disappointing values.
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.
