Trade Analysis for Monday:
1H Chart of the GBP/USD Pair
The GBP/USD pair showed quite a notable upward movement on Monday. For almost the entire day, the price moved in only one direction, and the grounds for this movement were purely technical. It is worth noting that over the last couple of weeks, the dollar has shown significant growth for which there are no strong objective reasons. Therefore, we have been observing a technical correction for several days now. In our view, the dollar has long since accounted for all positive factors. Even the potential but unconfirmed rate increases from the Federal Reserve have already been factored into the market. Thus, the higher the dollar rises, the lower it will eventually fall. In 2026, amid the war in the Middle East, the market shifted its focus to the US dollar, which remains the world's reserve currency. However, this factor will not influence market sentiment indefinitely. We remind you that the Bank of England may also implement tightening measures by the end of the year, while Trump's arrival has introduced so many problems that even outrageous stock market growth cannot offset them. Nonetheless, from a short-term perspective, the US currency may still strengthen.
5M Chart of the GBP/USD Pair
On the 5-minute timeframe, only one trading signal was formed on Monday. At the very end of the day, the price bounced off the 1.3259-1.3267 range and then began to decline. Unfortunately, it was not possible to work out all the upward movement for the day, as the price fell a few pips short of the 1.3175-1.3180 range to form a buy signal.
How to Trade on Tuesday:
On the hourly timeframe, the GBP/USD pair continues to form a downward trend. The conflict in the Middle East is not entirely resolved but is on pause; the Fed has only indicated a possible rate hike by the end of the year, which may or may not occur, and the market has not particularly reacted to Keir Starmer's resignation. Therefore, we do not see sufficient reasons for the dollar's growth in recent weeks, nor for its continuation.
On Tuesday, novice traders may consider remaining in short positions targeting 1.3175-1.3180 after a bounce from the range of 1.3259-1.3267. A price consolidation above the 1.3259-1.3267 range will enable long positions targeting 1.3319-1.3331.
On the 5-minute timeframe, the following levels can currently be traded: 1.3043, 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, 1.3695. On Tuesday, no significant events are scheduled in the UK, while in the US, only the JOLTs report on job openings will be released, which is not the most important piece of labor market data.
Basic Rules of the Trading System:
- The strength of a signal is determined by the time required to form it (a bounce or a breakout). The less time taken, the stronger the signal.
- If two or more trades were opened at a particular level based on false signals, subsequent signals from that level should be ignored.
- In a flat market, any pair may form many false signals or none at all. Technical levels may be disregarded.
- On the hourly timeframe, trading signals from the MACD indicator should be executed only when volatility is good, and a trend is confirmed by a trend line or channel.
- If two levels are too close together (5 to 20 pips), they should be considered a support or resistance area.
- After moving 15 pips in the correct direction, a Stop Loss should be set at breakeven.
What's on the Charts:
Price levels (areas) of support and resistance are targets when opening long or short positions or sources of signals.
Red lines indicate channels or trend lines that display the current trend and indicate the preferred direction for trading.
The MACD indicator (14,22,3) – histogram and signal line – is a supplementary indicator that can also be used as a source of signals.
Important speeches and reports (contained in the news calendar) can significantly impact the movement of the currency pair. Therefore, during their release, trading should be conducted with maximum caution, or one should exit the market to avoid sharp reversals against preceding movements.
Beginners trading in the forex market should remember that not every trade can be profitable. Developing a clear strategy and practicing money management are key to long-term success in trading.
