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Analysis of Wednesday’s deals:
30M chart of the GBP/USD pair
The GBP/USD pair once again failed to overcome the new level of 1.1827 on Wednesday and once again corrected to the upper limit of the descending channel. And once again failed to overcome it. Thus, as with the euro, the downward trend in the pound continues. We have already said that, since both major pairs are moving very similarly, if the pound does not overcome the downward channel, then it will be very difficult to count on the euro’s growth. We also want to once again draw attention to the fact that the dollar should have been rising on Wednesday, as inflation in the US again showed strong growth, and this significantly increases the likelihood of maintaining the Federal Reserve’s aggressive monetary approach. Thus, the first conclusion is that in the next few days the market will try to logically win back the inflation report, that is, with new short positions on both pairs. The second conclusion is that the inflation report did not affect the overall technical picture in any way: the downward trend, as it continued, continues to persist. Reports were also released in the UK. Reports on GDP and industrial production. We said yesterday that this is not the most significant data and, as we see, we were right – the market practically did not react to them.
5M chart of the GBP/USD pair
Wednesday’s movements on the 5-minute timeframe were also very difficult. However, much more signals were formed, and all turned out to be false. All trading signals were formed in the area of 1.1875-1.1898, thus, it was worth working out only the first two. At first, the pair rebounded from the level of 1.1898, but managed to go up only 17 points, which was not enough even to set the Stop Loss level to breakeven. It’s good that in a few hours the pair rebounded from the entire area and still managed to go up more than 20 points, so the long position still managed to be closed at breakeven. The next sell signal should have been ignored, as it was formed exactly at the time when the US inflation was released. And the 1.1827 level is new, and it did not take part in the trade. Thus, one could still manage to end the day without losing trades.
How to trade on Thursday:
The pair has not been able to leave the descending channel on the 30-minute TF and, having bounced off its upper border, may resume the downward movement again. The pound also has purely theoretical chances for some growth, but for this you need to at least leave the channel. On the 5-minute TF on Thursday, it is recommended to trade at the levels of 1.1807-1.1827, 1.1898, 1.1989, 1.2048. When the price passes after opening a deal in the right direction for 20 points, Stop Loss should be set to breakeven. There are no major reports or other events scheduled in the UK and America on Thursday. However, a volatile movement can be observed both on Thursday and Friday. We believe that the pair will make at least one more attempt to continue the fall. In any case, you need to wait either for an exit from the channel, or for overcoming the level of 1.1827.
Basic rules of the trading system:
1) The signal strength is calculated by the time it took to form the signal (bounce or overcome the level). The less time it took, the stronger the signal.
2) If two or more deals were opened near a certain level based on false signals (which did not trigger Take Profit or the nearest target level), then all subsequent signals from this level should be ignored.
3) In a flat, any pair can form a lot of false signals or not form them at all. But in any case, at the first signs of a flat, it is better to stop trading.
4) Trade deals are opened in the time period between the beginning of the European session and until the middle of the US one, when all deals must be closed manually.
5) On the 30-minute TF, using signals from the MACD indicator, you can trade only if there is good volatility and a trend, which is confirmed by a trend line or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 points), then they should be considered as an area of support or resistance.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14,22,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important speeches and reports (always contained in the news calendar) can greatly influence the movement of a currency pair. Therefore, during their exit, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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