Trade Analysis for Friday:
1H Chart of the GBP/USD Pair
On Friday, the GBP/USD pair was unable to continue its upward movement; however, the price remained above the 1.3319-1.3331 area, which supports expectations of further strengthening in the near future. Last week, the British currency had no strong reasons to grow other than the U.S. Nonfarm Payrolls report. However, this is just one day, and the pound has been rising for two weeks. We believe that this movement is entirely justified and should continue, as the U.S. dollar had been appreciating previously without clear reasons. Essentially, the market continues to ignore the fact that the conflict in the Middle East is over, and the Federal Reserve has only indicated its intention to raise the key rate by the end of the year. Whether this happens under Kevin Warsh, with Donald Trump renewing pressure on the Fed, is a big question. The latest labor market report indicates that the Fed is likely to refrain from tightening monetary policy, as it actively stimulated the labor market last year by lowering the key rate. Thus, the dollar has long been driven by all its bullish factors.
5M Chart of the GBP/USD Pair
On the 5-minute timeframe, only one trade signal was generated on Friday. At the start of the European trading session, the price bounced from the 1.3380-1.3386 area, triggering a 15-pip decline. These 15 pips are what novice traders could pocket.
How to Trade on Monday:
On the hourly timeframe, the GBP/USD pair continues to develop an upward trend, which is corrective in nature. The conflict in the Middle East, if not completely over, is currently paused, and the Fed has only declared a possible rate hike by the end of the year, which may not happen. We believe that the dollar has no more grounds for growth—neither fundamentally nor geopolitically. Therefore, the British pound's rise may continue.
On Monday, novice traders may consider short positions if the price consolidates below the 1.3319-1.3331 area, targeting 1.3259-1.3267. A bounce from the 1.3319-1.3331 area will allow for long positions targeting 1.3380-1.3386.
On the 5-minute timeframe, trading can currently occur at the following levels: 1.3043, 1.3096-1.3107, 1.3175-1.3180, 1.3259-1.3267, 1.3319-1.3331, 1.3380-1.3386, 1.3456-1.3476, 1.3587-1.3598, 1.3631-1.3641, and 1.3695. On Monday, there are no important events scheduled in the UK, while the ISM Services PMI will be released in the U.S., which is a significant event.
Basic Rules of the Trading System:
- The strength of a signal is determined by the time required to form it (a bounce or a breakout). The less time taken, the stronger the signal.
- If two or more trades were opened at a particular level based on false signals, subsequent signals from that level should be ignored.
- In a flat market, any pair may form many false signals or none at all. Technical levels may be disregarded.
- On the hourly timeframe, trading signals from the MACD indicator should be executed only when volatility is good, and a trend is confirmed by a trend line or channel.
- If two levels are too close together (5 to 20 pips), they should be considered a support or resistance area.
- After moving 15 pips in the correct direction, a Stop Loss should be set at breakeven.
What's on the Charts:
Price levels (areas) of support and resistance are targets when opening long or short positions or sources of signals.
Red lines indicate channels or trend lines that display the current trend and indicate the preferred direction for trading.
The MACD indicator (14,22,3) – histogram and signal line – is a supplementary indicator that can also be used as a source of signals.
Important speeches and reports (contained in the news calendar) can significantly impact the movement of the currency pair. Therefore, during their release, trading should be conducted with maximum caution, or one should exit the market to avoid sharp reversals against preceding movements.
Beginners trading in the forex market should remember that not every trade can be profitable. Developing a clear strategy and practicing money management are key to long-term success in trading.
