Analysis of Monday's Trades
1H Chart of GBP/USD
The GBP/USD pair traded both up and down on Monday. The uptrend remains intact thanks to the ascending trendline, which has been relevant for over a month—quite a rare occurrence for the hourly timeframe. The price has exited the ascending channel, so a correction toward the trendline is possible. The euro has also entered a corrective phase, so we believe the dollar will strengthen this week. Monday's macroeconomic backdrop was unusually contradictory, as the UK and U.S. business activity indices delivered conflicting signals in terms of character and the relationship between forecasts and actual results. As a result, the U.S. dollar barely gained by the end of the day. The British pound continues to demonstrate impressive resilience against the dollar, largely thanks to the Bank of England, which adopted a more hawkish stance on monetary policy during its latest meeting. Nevertheless, the pair cannot continue rising indefinitely without corrections.
5M Chart of GBP/USD
On the 5-minute timeframe on Monday, several trading signals were formed. Early in the European session, the price bounced off the 1.2913 level and climbed about 50 pips. Unfortunately, it missed the nearest target level by just seven pips, so the trade couldn't be closed by Take Profit. Then, there was another bounce from 1.2913, followed by a breakout of this level. Technically, all signals were false since the target levels weren't reached. However, no losses were possible, as the price moved at least 20 pips in the correct direction each time. It was best to ignore the third signal.
Trading Strategy for Tuesday:
The GBP/USD pair should have already begun a downtrend on the hourly timeframe, but Trump is doing everything to prevent that. In the medium term, we still expect the pound to decline toward 1.1800, but it's unclear how much longer the dollar's "Trump-induced" plunge will last. Once that move ends, the technical picture on all timeframes may change drastically, but long-term trends still point south. The pound has risen for a reason, but again, far too strongly and irrationally.
On Tuesday, GBP/USD may continue declining, as the technical setup of the hourly timeframe supports this view. The pound is once again overbought and unjustifiably expensive.
On the 5-minute chart, the following levels are relevant for trading: 1.2301, 1.2372–1.2387, 1.2445, 1.2502–1.2508, 1.2547, 1.2613, 1.2680–1.2685, 1.2723, 1.2791–1.2798, 1.2848–1.2860, 1.2913, 1.2980–1.2993, 1.3043, 1.3102–1.3107. No important events or reports are scheduled in the UK on Tuesday, and the only release in the U.S. is the new home sales report. Therefore, macroeconomic influence on the pair's movement will be minimal today.
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.
