Analyzing Monday's Trades:
GBP/USD on 1H Chart
The GBP/USD pair also showed an upward movement on Monday, and a relatively strong one, despite an empty economic calendar. However, by 2024, traders have long become accustomed to the baseless growth of the British currency. Of course, one might assume that the market is again preemptively pricing in the Federal Reserve's monetary policy easing, which will happen on Wednesday, but don't you think that the market has spent the entire year preemptively pricing in the Fed's rate cut, which hasn't even happened yet?
The price has returned to the descending trendline, and it looks like this line will be broken soon. Today, we might see a rebound from it and a slight decline, followed by a breakthrough. The market is once again signaling that it is only prepared to sell the US dollar, and the only factor of interest is the Fed's monetary policy. The pound continues to rise regardless of any macroeconomic or fundamental backdrop.
GBP/USD on 5M Chart
On the 5-minute time frame on Monday, a decent buy signal was formed. Unfortunately, the 100-pip upward movement had already started overnight, so entering the market came with a significant delay. Nevertheless, long positions could have been opened even with the existing buy signal around the 1.3145-1.3167 area. The price did not reach the nearest target of 1,3225, but the trade could have been closed manually in the evening at practically any point.
How to Trade on Tuesday:
In the hourly time frame, GBP/USD has a good chance of resuming the global downtrend or at least seeing a significant correction, but so far, we haven't seen either. The British pound remains overbought, the dollar is undervalued, and the market is still much more inclined to sell the dollar than to buy it. So far, the pound only shows a weak bearish correction. It is too early to speak of a full-fledged downtrend. As early as today, the price could well consolidate above the trendline, reducing the chances of a significant decline in the British currency.
On Tuesday, the pair could resume its decline as it approaches the trendline. However, breaking through it would allow new long positions to be opened.
In the 5-minute time frame, you can currently trade around the levels of 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, 1.3145-1.3167, 1.3225, 1.3272, 1.3310. No significant events are scheduled for Tuesday in the UK, but last week, the market showed us that it isn't particularly interested in British data. In the US, industrial production and retail sales reports will be released.
Basic Rules of the Trading System:
1) The strength of a signal is determined by the time it takes for the signal to form (bounce or level breakthrough). The less time it took, the stronger the signal.
2) If two or more trades were opened around any level due to false signals, subsequent signals from that level should be ignored.
3) In a flat market, any currency pair can form 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 midway through the U.S. session. After this period, all trades must be closed manually.
5) In the hourly time frame, trades based on MACD signals are only advisable amidst good volatility and a trend confirmed by a trendline or trend channel.
6) If two levels are too close to each other (5 to 20 pips), they should be considered a support or resistance area.
7) After moving 20 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 for opening long or short positions. You can place Take Profit levels around them.
Red lines: channels or trend lines that depict the current trend and indicate the preferred trading direction.
The MACD indicator (14,22,3): 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 movement of a currency pair. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to avoid sharp price reversals against the prevailing movement.
For beginners, it's important to remember that not every trade will yield profit. Developing a clear strategy and effective money management is key to success in trading over the long term.
