Analysis of Tuesday's Trades
1H Chart of GBP/USD
On Tuesday, the GBP/USD pair continued to trade with a minimal upward bias. The pound sterling is rising again, even when the euro is falling or stagnant. While the euro has been trading in a flat range for three weeks, the pound has shown weak but steady growth during the same period. Once again, the British currency demonstrates greater resilience compared to the euro despite the fundamental and macroeconomic backdrops being almost identical. However, this resilience is unlikely to save the pound in the medium term. While the pound may continue to rise for some time due to the technical need for a correction, the decline should resume after the correction ends. Today, a critical U.S. inflation report will be released, which could trigger either a rise or a fall in the pair. Regardless of the data, we anticipate a decline and will focus solely on short positions.
5M Chart of GBP/USD
On the 5-minute timeframe, there were virtually no trading signals on Tuesday. We have removed the 1.2754 level, which the price failed to respond to consistently. Instead, we have established a new level at 1.2723, which has seen three rebounds over the last three days. The pair has been trading in a horizontal channel over the past three days. A new wave of decline may start today, but as mentioned, much will depend on the U.S. inflation report due in the afternoon.
Trading Strategy for Wednesday:
On the hourly timeframe, the GBP/USD pair continues to correct after a two-month decline. We fully support a bearish outlook for the pound in the medium term, as we believe it to be the only logical scenario. The pound is correcting purely on technical grounds, but current price action suggests that the correction may be nearing completion.
For Wednesday, novice traders can anticipate a renewed decline in the British pound, as the price has failed to break above 1.2798 twice. Any decline will likely remain within the channel of 1.2723–1.2791 for now.
On the 5-minute timeframe, you can trade based on the following levels: 1.2387, 1.2445, 1.2502-1.2508, 1.2547, 1.2633, 1.2680-1.2685, 1.2723, 1.2791-1.2798, 1.2848-1.2860, 1.2913, 1.2980-1.2993. No significant reports are scheduled in the UK on Wednesday, but the U.S. will release its November inflation report, a critical event that could provoke stronger movements than those seen after the Federal Reserve meeting.
Core Trading System Rules:
- Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
- False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
- Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
- Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
- MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
- Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
- Stop Loss: Set a Stop Loss to breakeven after the price moves 15 pips in the desired direction.
Key Chart Elements:
Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.
Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.
MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.
Important Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.
Forex trading beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are essential for long-term trading success.
