Analysis of Tuesday's Trades:
1H Chart of the GBP/USD Pair
The GBP/USD pair also surged upward on Tuesday, having initially bounced off the ascending trend line. Throughout the day, traders received several technical buy signals. In addition to these signals, important reports were published in the UK in the morning, which were initially challenging for beginner traders to decipher, but they logically triggered an increase in the pair. We believe the key report was not the unemployment rate but the wage growth. Wages have a direct impact on inflation levels, and inflation, in turn, influences the monetary policy of the Bank of England. Thus, stronger wage growth means that inflation in the UK may begin to accelerate, contrary to the expectations of the Bank of England. A new consumer price index is scheduled for release this morning, and the BoE meeting will take place tomorrow. The British pound is facing two very important and eventful days. If inflation continues to rise, it could provide significant support for the British currency and force the BoE to reconsider plans to ease monetary policy this December.
5M Chart of the GBP/USD Pair
On the 5-minute timeframe, four buy signals were formed on Tuesday, essentially duplicating each other. First, the pair broke above the 1.3413-1.3421 area, then it bounced off it from above three times. Today, it might rebound for the fourth time, which would lead to continued growth targeting the 1.3466-1.3475 area.
How to Trade on Wednesday:
On the hourly timeframe, the GBP/USD pair continues to form a local upward trend. As we mentioned, there are no global foundations for medium-term dollar growth, so we expect movement only to the north. Overall, we also anticipate the resumption of the global upward trend of 2025, which could lead the pair to the 1.4000 mark in the next couple of months.
On Wednesday, novice traders can consider new long positions if the price bounces off the 1.3413-1.3421 area, targeting the 1.3466-1.3475 area. If the indicated area is broken, short positions will become relevant targeting levels 1.3319-1.3331.
On the 5-minute timeframe, levels to consider for trading include 1.2913, 1.2980-1.2993, 1.3043, 1.3096-1.3107, 1.3203-1.3212, 1.3259-1.3267, 1.3319-1.3331, 1.3413-1.3421, 1.3466-1.3475, 1.3529-1.3543, and 1.3574-1.3590. For Wednesday, the UK will publish an inflation report, which is essentially the only event of the day. If the inflation figure comes in higher than expected, it will be significantly easier for the British currency to rise. Conversely, if the inflation data disappoints, the pair may continue to decline.
Key Rules of the Trading System:
- The strength of a signal is assessed by the time it takes to form the signal (bounce or breakout). The less time it takes, the stronger the signal.
- If two or more trades were opened near any level based on false signals, all subsequent signals from that level should be ignored.
- In a flat, any pair can create numerous false signals or none at all. In any case, it's better to stop trading at the first signs of a flat.
- Trades are opened during the period between the start of the European session and the middle of the American session, after which all trades must be closed manually.
- On the hourly timeframe, when trading based on signals from the MACD indicator, it is preferable to trade only when good volatility is present, and a trend is confirmed by a trend line or channel.
- If two levels are positioned too closely to each other (5 to 20 points), they should be viewed as a support or resistance area.
- After moving 20 pips in the right direction, set the Stop Loss to breakeven.
Chart Explanation:
- Support and Resistance Levels: Levels that serve as targets for opening buys or sells. Take Profit levels can be placed near them.
- Red Lines: Channels or trend lines that reflect the current trend and indicate the preferred direction for trading.
- MACD Indicator (14, 22, 3): A histogram and signal line, a supplementary indicator that can also be used as a source of signals.
Important Note: Significant speeches and reports (always included in the news calendar) can greatly influence the movement of the currency pair. Therefore, during their release, it is advisable to trade cautiously or exit the market to avoid sharp reversals against the preceding movement.
Remember: For beginners trading in the Forex market, it is important to understand that not every trade can be profitable. Developing a clear strategy and practicing money management are keys to long-term trading success.
