Analysis of Wednesday's Trades:
1H Chart of the GBP/USD Pair
The GBP/USD pair displayed mixed movements throughout Wednesday. It is worth noting that strong US macroeconomic data did not cause significant problems for the British currency. In the first half of the day, the pound sterling appreciated by 80 pips, while in the second half, it fell by 90 pips. Thus, the American labor market reports helped the dollar, but nothing fundamentally changed. Consequently, a key moment for the GBP/USD pair remains the breakthrough of the descending trend line on the hourly timeframe. The trend has shifted upward, so further growth of the British currency can be expected. Under the influence of the Non-Farm Payrolls and unemployment reports, the dollar's strengthening may continue on Thursday; hence, today will answer whether market sentiment has changed in response to the latest economic news. Recall that a recovery in the labor market means that the Federal Reserve will no longer need to stimulate it through rate cuts. On the other hand, if inflation shows a new slowdown on Friday, it would provide grounds for continuing monetary easing.
5M Chart of the GBP/USD Pair
On the 5-minute timeframe, a decent trading signal was formed early Wednesday morning. The price broke through the 1.3643-1.3652 area, after which it moved in the desired direction by about 45 pips. This trade should have been closed manually before the release of important US data, resulting in a profit. The market then became engulfed in a wave of emotions, driving volatility higher. Therefore, we did not consider any subsequent signals around the area of 1.3643-1.3652.
How to Trade on Thursday:
On the hourly timeframe, the GBP/USD pair has broken the downward trend. There are no global grounds for medium-term dollar growth, so we expect the global upward trend to continue from 2025, which could push the pair to at least the 1.4000 mark. In recent weeks, the situation has often not favored the British currency, but now the pound has every chance to return to the 38 level based on technical factors.
On Thursday, beginner traders may consider short positions if the pair bounces from the 1.3643-1.3652 area, targeting 1.3529-1.3543. A consolidation above the area of 1.3643-1.3652 will allow for the opening of long positions with a target of 1.3741-1.3751.
On the 5-minute timeframe, levels to consider include: 1.3319-1.3331, 1.3365, 1.3403-1.3407, 1.3437-1.3446, 1.3484-1.3489, 1.3529-1.3543, 1.3643-1.3652, 1.3741-1.3751, 1.3814-1.3832, 1.3891-1.3912, and 1.3975. On Thursday, the UK is scheduled to publish fourth-quarter GDP figures and industrial production figures. These are not the most significant reports, but they may influence trader sentiment. In the US, only minor reports will be released, which generate little interest.
Main Rules of the Trading System:
- The strength of the signal is determined by the time it takes to form (rebound or breaking through the level). The shorter the time, the stronger the signal.
- If two or more trades were opened around a particular level based on false signals, all subsequent signals from that level should be ignored.
- In a flat market, any pair can generate numerous false signals or no signals at all. In any case, it is best to stop trading at the first signs of a flat.
- Trades are opened during the time period between the start of the European session and until the middle of the American session, after which all trades should be manually closed.
- On the hourly timeframe, signals from the MACD indicator should ideally be traded only when there is good volatility and a trend confirmed by a trend line or channel.
- If two levels are too close to each other (ranging from 5 to 20 pips), they should be considered as a support or resistance area.
- After moving 20 pips in the correct direction, it is advisable to set the Stop Loss to break-even.
What's on the Charts:
- Support and resistance levels are targets for opening buy or sell trades. Take Profit levels can be placed around them.
- Red lines indicate channels or trend lines that reflect the current trend and indicate the preferred direction for trading now.
- The MACD indicator (14,22,3) – the histogram and signal line – serves as a supplementary indicator that can also be used as a source of signals.
- Important speeches and reports (always found in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be conducted with maximum caution, or it is advised to exit the market to avoid a sharp price reversal against the preceding movement.
- Beginners trading in the Forex market should remember that not every trade can be profitable. Developing a clear strategy and practicing sound money management are the keys to long-term trading success.
