Analyzing Thursday's trades:
GBP/USD on 1H chart
The GBP/USD pair retreated to the level of 1.2798 on Thursday due to U.S. data that finally provided some support for the dollar. Reports on jobless claims and retail sales were stronger than forecasts, which allowed the dollar to rise. However, this growth was short-lived, and an intraday decline preceded it. The UK released a neutral GDP report and positive industrial production data in the morning. About an hour after the retail sales report, the U.S. industrial production data came out, which caused dollar buyers to change their positions quickly. Thus, the positive reports across the Atlantic did not significantly impact the overall market situation. The dollar slightly corrected but nothing more. The upward trend remains intact after the price exits the descending channel.
GBP/USD on 5M chart
In the 5-minute time frame on Thursday, several trading signals were generated. As with the euro, the price dropped sharply at the beginning of the U.S. trading session, so the sell signal could not be executed. However, the rebound from the 1.2791-1.2798 area was tradeable, and the price returned to the 1.2848-1.2860 range within an hour or so. Thus, there was still one profitable trade on Thursday. Today, the pair aims to consolidate above the mentioned area so that the upward movement may continue.
Trading tips on Friday:
In the hourly time frame, GBP/USD has a good chance of sustaining the downtrend but is going through an upward correction. The British pound is still overbought, while the dollar is undervalued, and the market continues to use every opportunity to buy the British currency. It often ignores any unfavorable reports. The few positive reports from the U.S. that occasionally appear have minimal impact on the dollar.
On Friday, novice traders might trade around the 1.2848-1.2860 area. The UK and the U.S. have interesting reports, and the dollar might again come under market pressure, making a rise quite likely.
The key levels to consider on the 5M timeframe are 1.2547, 1.2605-1.2633, 1.2684-1.2693, 1.2748, 1.2791-1.2798, 1.2848-1.2860, 1.2913, 1.2980-1.2993, 1.3043, 1.3102-1.3107, and 1.3145. The UK will release retail sales data on Friday, and the U.S. will publish reports on consumer sentiment and building permits. These data are unlikely to provoke a strong market reaction, but the dollar doesn't need much to fall now.
Basic rules of a trading system:
1) The strength of a signal is determined by the time it took for the signal to form (bounce or level breakthrough). The shorter the time required, the stronger the signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be ignored.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, it's better to stop trading at the first signs of a flat market.
4) Trades should be opened between the start of the European session and mid-way through the U.S. session. All trades must be closed manually after this period.
5) In the hourly time frame, 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 are too close to each other (from 5 to 20 pips), they should be considered as a support or resistance zone.
7) After moving 15 pips in the intended direction, the Stop Loss should be set to break-even.
What's on the charts:
Support and Resistance price levels: targets when opening long or short positions. You can place Take Profit levels near them.
Red lines: channels or trend lines that depict the current trend and indicate the preferred 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 source of signals.
Important 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 effective money management, is key to long-term success in trading.
