Analyzing Friday's trades:
GBP/USD on 1H chart
GBP/USD continued its upward movement on Friday. The British pound did not even attempt to correct lower, unlike the euro. While the single currency had formal reasons to show growth, as Isabel Schnabel said the European Central Bank may slash interest rates in June, there were no reasons for the pound to rise. However, the fact that the British currency rose again probably doesn't surprise anyone anymore.
For the last six months (if not more), we have regularly mentioned that the pound is rising for reasons both known and unknown, while the dollar has much more technical and fundamental grounds to strengthen. However, the market continues to ignore the fundamental background. Perhaps the Bank of England is secretly behind the pound's rise by conducting currency interventions, or maybe market makers urgently need billions of pounds. But the fact is the pound continues its illogical growth. From a technical perspective, we have an ascending trend line on the hourly timeframe, so we should not expect a decline until the price breaches this mark.
GBP/USD on 5M chart
Two buy signals were formed on the 5-minute timeframe. At the beginning of the US trading session, the price bounced off the level of 1.2648, after which it moved up by about 45 pips and surpassed the level of 1.2691 on its way. Novice traders could have earned 45 pips, as the pound did not find the strength to retreat by the end of the day.
Trading tips on Monday:
On the hourly chart, the GBP/USD pair has great prospects for forming a downward trend, but the bullish correction remains intact. The fundamental backdrop continues to support the dollar much more than the British currency, but the pound continues to rise. Reports and speeches do not always support the pound, but the market interprets almost all the news in favor of the British currency.
If we are talking about logical movements, then we expect the pound to fall on Monday, but considering the fact that the market does not need reasons for purchases, the pound can still rise.
The key levels on the 5M chart are 1.2270, 1.2310, 1.2372-1.2387, 1.2457, 1.2502, 1.2541-1.2547, 1.2605-1.2611, 1.2648, 1.2691, 1.2725, 1.2787-1.2791. There are no significant events planned in the UK and the US, so there will be nothing to analyze. Volatility will likely remain low, but this doesn't mean that the pound will not be able to rise.
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.
