Analysis of Monday's Trades
1H Chart of GBP/USD
On Monday, the GBP/USD pair failed to continue its downward movement and could not break through the 1.2613 level. There were no more reasons for the British currency to rise than for the euro. While the euro traded sideways for most of the day, the pound showed confident growth. Could this be due to macroeconomic data from the UK?
The Manufacturing PMI declined from 48.0 to 47.3, falling short of higher forecasts. The Services PMI increased from 50.8 to 51.4, surpassing lower expectations. Thus, one report exceeded expectations while the other disappointed, meaning the macroeconomic backdrop could not have driven the pound's growth. We believe the reason lies in the 1.2613 level, which has previously acted as support. Consequently, the upward correction remains relevant for now. This week will feature numerous fundamental and macroeconomic events, making any direction possible.
5M Chart of GBP/USD
On Monday, the first and essentially only trading signal was formed overnight on the 5-minute timeframe when the price bounced off the 1.2613 level. By the opening of the European session, the price had moved 10–11 pips away from the entry point, so a buy trade could have been opened. During the U.S. session, the price reached the 1.2680–1.2685 area, where profits could be locked in.
Trading Strategy for Tuesday:
In the hourly timeframe, the GBP/USD pair has presumably completed its upward correction, but there is no certainty or guarantee. We fully support the pound's decline in the medium term, considering it the only logical scenario. Therefore, further declines in the British currency can be expected soon, but this week, close attention must be paid to fundamentals and macroeconomic data.
On Tuesday, beginners can trade from the 1.2680–1.2685 area. A break below this area would indicate a new downward movement.
On the 5-minute timeframe, the following levels are relevant for trading: 1.2387, 1.2445, 1.2502-1.2508, 1.2547, 1.2633, 1.2680-1.2685, 1.2723, 1.2791-1.2798, 1.2848-1.2860, 1.2913, 1.2980-1.2993. On Tuesday, important reports will be published in the UK, including Unemployment data, Jobless claims, and Wage growth. In the U.S., relatively important reports on industrial production and retail sales will be released. Significant deviations from forecasts could trigger a strong intraday movement.
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.
The material has been provided by InstaForex Company - www.instaforex.com
