Analyzing Thursday's trades:
GBP/USD on 1H chart
GBP/USD traded lower on Thursday. While the euro's decline suggests a potential downward trend for the EUR/USD pair, for the British pound, a decline doesn't mean anything important. Just to remind you, the GBP/USD pair has been trading between the levels of 1.2693 and 1.2798 for three weeks now. On Wednesday, it traded sharply higher above this sideways channel, but this didn't change the overall situation. The pair is still trading sideways, as it fails to start a bearish correction, unable to break through the level of 1.2693, while the market continues to avoid large dollar purchases.
Yesterday, the UK economic calendar was basically empty. Meanwhile, the U.S. Producer Price Index was released, initially exerting pressure on the dollar. Fortunately, the market quickly rectified the situation and remembered that the minor slowdown in any derivative of inflation does not currently affect the prospects of a Federal Reserve rate cut. Therefore, the dollar immediately stopped falling. However, bear in mind that the pair could still easily fall to the level of 1.2693. Problems are likely to arise around this level.
GBP/USD on 5M chart
Two trading signals were formed on the 5-minute timeframe. The pair bounced from the area of 1.2791-1.2798 twice. After the first bounce, the price fell by only 18 pips, so beginners could have stayed in short positions at the second bounce. Eventually, the price reached the nearest target level of 1.2748, so traders could earn about 35 pips of profit.
Trading tips on Friday:
On the hourly chart, the GBP/USD pair has great prospects for forming a downward trend, although the uptrend still persists. The market has finally considered the strong U.S. data, but this could well be a one-off case. The pound did not fall further despite breaking the trend line, weak UK data, and the Fed's hawkish policy.
For Friday, we would advise you to expect the pound to fall towards the 1.2684-1.2693 area if the price breaches the level of 1.2748. A bounce from the 1.2748 level could trigger a new rise, but it is unlikely to be a strong movement.
The key levels on the 5M chart are 1.2457, 1.2502, 1.2541-1.2547, 1.2605-1.2633, 1.2684-1.2693, 1.2748, 1.2791-1.2798, 1.2848-1.2860, 1.2913, 1.2980. Today, the UK economic calendar is empty. We can only highlight the University of Michigan Consumer Sentiment Index in the U.S.. We do not expect strong movements on Friday.
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.
