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GBP/USD showed a much stronger decline than the rise seen on Wednesday. We had warned about this possibility. There were several reasons for this. Firstly, the outcome of the Federal Reserve meeting couldn't be considered dovish, so the dollar shouldn't have sharply fallen on Wednesday. Secondly, the results of the Bank of England meeting could be deemed "moderately dovish," as the British central bank suggested that it was ready to consider rate cuts in the coming months. Thirdly, the market often trades emotionally after central bank meetings, and prices eventually return to their original levels.
Therefore, although the price left the descending channel, this channel is still relevant. The downtrend persists, but this is only a short-term trend. We expect the pound to fall in the medium-term.
Several trading signals were generated on the 5-minute timeframe, and almost all of them were profitable. It all started with the pair consolidating below the range of 1.2787-1.2791. Then the pair simply surpassed each subsequent level. The only problem appeared at the beginning of the US session when the price bounced off the level of 1.2725. However, it was at this time that the results of the BoE meeting were announced, so it was not advisable to enter new trades. It was much better to set Stop Loss to breakeven for short positions that were already open and just wait. As we can see, the results were supposed to exert pressure on the pound, and the currency continued to fall. By the end of the day, the pair reached the level of 1.2648, where shorts should have been closed. The profit amounted to about 110 pips.
On the hourly chart, GBP/USD has resumed its downward movement. Unfortunately, the market continues to trade erratically quite often, which at the very least confuses traders, especially beginners. Nevertheless, the British currency has been declining in recent weeks, which is a positive development. The downtrend persists.
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 retail sales report will be released, which has a slight chance of influencing market sentiment. Meanwhile, the US event calendar is empty. Thus, after two decent days, volatility may significantly decrease again.
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.
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.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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