Analysis of Monday's Trades
1H Chart of GBP/USD
On Monday, the GBP/USD pair exhibited mixed movements due to a lack of macroeconomic background and fundamental economic data. The British pound, similar to the euro, is currently undergoing a correction after a three-month decline. This correction does not rely on any specific news or data. In simpler terms, the market is taking profits from previously opened short positions while also gradually selling the dollar, influenced by some of Donald Trump's "brilliant" initiatives. As a result, the pound sterling may continue to rise for a few more weeks.
However, this upward movement won't be straightforward; the pair could remain in a consolidation phase for an extended period. Additionally, the "Trump factor" won't continuously drive dollar selling. At least two upcoming events—the FOMC and Bank of England meetings—are likely to provide support for the dollar. Therefore, we expect the pair to begin moving toward the trendline soon.
5M Chart of GBP/USD
On the 5-minute timeframe, several trading signals were generated on Monday, but unfortunately, they proved to be quite inaccurate. Initially, the price bounced off the 1.2445 level; however, it first consolidated below this level. As a result, novice traders may have opened short positions, leading to losses. A rebound also occurred from the 1.2502-1.2508 area, which was more accurate, but the price did not reach the nearest target level that day. Later at night, the price bounced again from this area and eventually dropped to the 1.2445 level. Overall, it wasn't a great day for traders.
Trading Strategy for Tuesday:
On the hourly timeframe, the GBP/USD pair is continuing to form a short-term upward trend, which appears to be a correction. In the medium term, we expect the pound to decline to 1.1800, as this seems to be the only logical scenario. Therefore, we should anticipate a downward movement, and the trendline will help us determine when the current correction ends.
On Tuesday, the GBP/USD pair may begin a downward retracement since the 1.2502-1.2508 area has not been breached after two attempts.
On the 5-minute timeframe, trading can be conducted around the following levels: 1.2010, 1.2052, 1.2089-1.2107, 1.2164-1.2170, 1.2241-1.2270, 1.2301, 1.2372-1.2387, 1.2445, 1.2502-1.2508, 1.2547, 1.2633, 1.2680-1.2685, 1.2723, and 1.2791-1.2798. No significant events are scheduled for Tuesday in the UK. However, in the US, an important Durable Goods Orders report will be released. If this report exceeds expectations, it could help the dollar recover from its recent decline following the impact of Trump's actions.
Core Trading System Rules:
- Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
- False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
- Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
- Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
- MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
- Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
- Stop Loss: Set a Stop Loss to breakeven after the price moves 20 pips in the desired direction.
Key Chart Elements:
Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.
Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.
MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.
Important Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.
Forex trading beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are essential for long-term trading success.
