Analyzing Thursday's trades:
GBP/USD on 1H chart
The GBP/USD pair continued to trade higher on Thursday, but then it retreated during the US session. As we have already mentioned, the pound had no justifiable reason to rise this week. However, it is important to remember that in the global context, the pound remains within a sideways channel between the levels of 1.25 and 1.28, which has persisted for over 4 months. Therefore, approaching the lower boundary of the channel led to a bullish reversal, and now the pair may head towards the upper boundary. From a technical perspective, the downtrend has ended on the hourly timeframe, and the fundamental and macroeconomic backdrop is not interesting for the pound at the moment.
Today, the US reports on Nonfarm Payrolls and unemployment will be in focus. We no longer believe that the pound will ever start a consistent decline. We are under the impression that someone or something is supporting the British currency, which prevents it from falling. Therefore, we don't expect a firm rise in the dollar today, even if the US reports turn out to be strong. On the other hand, the price may quickly return to its initial positions after the decline.
GBP/USD on 5M chart
There were two rebounds from the level of 1.2648 on the 5-minute timeframe. The price moved in the intended direction by about 10 pips in the first case, and by about 20 pips in the second case. Therefore, the signals turned out to be duplicates, and traders should have opened only one long position based on them. It could have been manually closed for profit in the evening. At that time, there were no sell signals yet, and the price had not returned to the level of 1.2648.
Trading tips on Friday:
On the hourly chart, the GBP/USD pair is likely starting a new upward movement while the flat phase remains intact. Unfortunately, the market doesn't always trade in a logical manner, and on a global scale, the flat persists. Therefore, in the coming weeks, we can expect the pair to rise towards the 1.2800 level, but it's still showing erratic movements, with hardly any logic behind them.
On Friday, novice traders can base their decisions on the range of 1.2605-1.2611. You may consider new long positions when the price bounces from this area. In our opinion, the pair will be able to consolidate below this mark if the US releases strong reports.
The key levels on the 5M chart are 1.2372-1.2387, 1.2457, 1.2502, 1.2544, 1.2605-1.2611, 1.2648, 1.2691, 1.2725, 1.2787-1.2791, 1.2848-1.2860, 1.2913, 1.2981-1.2993. On Friday, the UK Construction PMI will be published, which could trigger a market reaction of up to 20 pips, but it will not have a significant impact on the pair. Moving on, market participants will focus on the Nonfarm Payrolls and unemployment data.
Basic trading rules:
1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.
2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.
3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.
4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, after which all open trades should be manually closed.
5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trendline or trend channel.
6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.
How to read charts:
Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.
Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.
The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.
Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.
Beginners should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.
