Trade Analysis for Friday:
1H Chart of the GBP/USD Pair
The GBP/USD pair also showed both a correction and trend growth on Friday. There were no major events in the UK and the U.S. on that day, and the geopolitical situation can no longer provide powerful support to the U.S. dollar. The situation in the Middle East continues to unfold according to the script of classic Mexican soap operas. The conductor of this "Marlborough ballet" remains Donald Trump. The American president is at a deadlock and does not know what to do next with Iran. Military actions yield no results, and Iran has no desire to return to the negotiating table. Moreover, Tehran certainly does not intend to accept Trump's ultimatums or sign an unfavorable and downright dangerous agreement with Washington. Therefore, Trump has no choice but to alternate between new strikes on Iran and conciliatory rhetoric, making statements about an upcoming agreement. This theater has now become a burden on the market. Even the Federal Reserve cannot currently support the American currency, as everyone understands that the policy-tightening outlook is uncertain. The Bank of England is much closer to tightening than the American central bank.
5M Chart of the GBP/USD Pair
On the 5-minute timeframe, two trading signals were formed on Friday. Initially, the pair bounced off the area of 1.3456-1.3476, allowing for short positions to be opened. However, the pair did not reach the target area. During the American trading session, the pound broke through the 1.3456-1.3476 area, allowing long positions to be opened with an eye on the new week.
How to Trade on Monday:
On the hourly timeframe, the GBP/USD pair has begun a new upward trend. In our view, the British pound will continue to rise, even if local factors do not support it. On the weekly timeframe, a move began from the lower boundary of the sideways channel to the upper boundary a month ago. This movement is not yet complete. The Fed did not support the dollar, and geopolitics cannot sustain it forever; therefore, we see no reason for further strengthening of the American currency.
On Monday, novice traders may open short positions if the price consolidates below the 1.3456-1.3476 area, targeting 1.3380-1.3386. Long positions can be considered on a bounce from the 1.3456-1.3476 area, targeting 1.3587-1.3598.
On the 5-minute timeframe, levels to trade now include 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. There are no major events scheduled in the UK for Monday, while the important ISM manufacturing index will be published in the U.S. This should be noted.
Main Rules of the Trading System:
- The strength of the signal is assessed based on the time it took to form (bounce or level breakthrough). The less time required, the stronger the signal.
- If two or more trades are opened around a certain level based on false signals, all subsequent signals from that level should be ignored.
- In a flat, any pair can generate a plethora of false signals or none at all. Technical levels may be disregarded.
- On the hourly timeframe, when trading based on signals from the MACD indicator, it is preferable to do so only in the presence of good volatility and a trend confirmed by a trend line or channel.
- If two levels are too close to each other (from 5 to 20 pips), they should be regarded as a support or resistance area.
- After a 15-pip move in the correct direction, a Stop Loss should be set to break even.
What the Charts Show:
Support and resistance price levels (areas) are the targets when opening buy or sell orders or sources of signals. Red lines denote channels or trend lines that reflect the current trend and indicate in which direction trading is currently favored. The MACD indicator (14,22,3) – histogram and signal line – is a supporting indicator that can also be used as a source of signals.
Important speeches and reports (as listed in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be approached with utmost caution, or one should exit the market to avoid sharp price reversals against the preceding movement.
Beginners in Forex trading should remember that not every trade can be profitable. Developing a clear strategy and proper money management are essential for long-term trading success.
