Analyzing Wednesday's trades:
GBP/USD on 1H chart
GBP/USD also climbed sharply on Wednesday. As we mentioned in the article on EUR/USD, there were no significant reasons for such a strong decline in the dollar, but the Federal Reserve still did not tighten its stance (as many expected), and also lowered its interest rate forecasts for the next two years. Therefore, let's be honest: there was a reason why the dollar fell. The problem, as before, is that the market is eager to sell the dollar but is reluctant to buy it. This results in a bias, although the fundamental and macroeconomic background does not always support the GBP/USD bulls. At the moment, the pair has left the bounds of the descending channel, so we can expect the pound to strengthen. However, there's also the possibility that the pound could fall against the backdrop of the Bank of England meeting.
GBP/USD on 5M chart
Several trading signals were generated on the 5-minute timeframe. As soon as the pair showed a strong movement, it was immediately possible to make a profit. The first sell signal in the form of a rebound from the level of 1.2725 brought a profit of 15 pips. The bounce from the level of 1.2691 should have been interpreted as a buy signal, and long positions should have been opened. Traders could take profit on long positions around the level of 1.2725, but it was even better to set a stop loss to breakeven and wait for the announcement of the results of the Federal Reserve meeting. As a result, the pair rose to the area of 1.2787-1.2791, where traders could have closed longs in profit by about 80 pips.
Trading tips on Thursday:
On the hourly chart, GBP/USD struggled to move downward for two weeks, only to literally erase most of its losses in just a day. The market is more inclined to buy the pound than the dollar, so it shows a noticeable reaction to any kind of positive news. Today, practically any results of the BoE's meeting can also be interpreted in favor of the pound. In any case, the British currency has been either rising or staying flat for the past six months, and it is unable to start a firm bearish correction.
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 Thursday, the results of the BoE's meeting will be announced, and for now, it is extremely difficult to say what we can expect from the British central bank. In addition, PMI data in Britain and the US will be released, along with several other minor reports in America. However, the market will focus on the BoE meeting.
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.
