Wednesday's Trade Analysis:
GBP/USD 1-hour chart.
The GBP/USD pair also continued its upward movement on Wednesday, largely driven by the Republicans' decisive defeat in the US elections. However, unlike the euro, the British pound is currently trading within an established uptrend that began three weeks ago and, from a technical perspective, appears fully justified. It is worth recalling that the key factor for the pound remains the sideways channels on the daily and weekly timeframes. The upward movement began from the lower boundaries of these channels, with prices now moving toward their upper boundaries. Therefore, further gains in the pair remain the preferred scenario. Today, the Bank of England may implement its first monetary policy tightening measure as part of its efforts to combat high inflation. Tomorrow, the US labor market and unemployment reports will be released, and they are unlikely to show particularly strong figures. Thus, both macroeconomic and fundamental factors currently favor the British pound. Overall, the pound is trading in a much more technically consistent manner than the euro. Yesterday's US ADP employment report and ISM Services PMI triggered virtually no market reaction.
GBP/USD 5-minute chart.
Two buy signals were generated in the 1.3456–1.3476 level on the 5-minute timeframe on Wednesday. However, the price traded sideways for most of the day, while the majority of the pair's gains occurred during the Asian trading session. The British pound retains its upward potential, and buy positions could have been held overnight into Thursday.
How to Trade on Thursday:
On the hourly timeframe, GBP/USD continues to develop an upward trend. Overall, the British pound is trading more consistently from a technical perspective than the euro, giving it a good chance of extending its upward movement. The technical picture across almost all timeframes supports further gains in the British currency. The fundamental backdrop and the US dollar's overbought conditions also favor further appreciation in GBP/USD.
On Thursday, beginner traders may consider short positions targeting 1.3380–1.3386 if the price consolidates below the 1.3456–1.3476 level. Long positions may be opened with a target of 1.3587–1.3598 if the price rebounds from the 1.3456–1.3476 level once again.
On the 5-minute timeframe, trades can currently be considered based on the following levels: 1.3043, 1.3096–1.3107, 1.3175–1.3180, 1.3259–1.3267, 1.3319–1.3331, 1.3380–1.3386, 1.3456–1.3476, 1.3587–1.3598, and 1.3631–1.3641. On Thursday, the UK will hold a significant Bank of England meeting that could mark the beginning of an extended period of monetary policy tightening. Although the market is already aware of the Bank of England's plans, the pound could still appreciate against the US dollar today. The US economic calendar is relatively light.
Main Rules of the Trading System:
- The strength of a signal is determined by the time required for it to form (a rebound or a breakout of a level). The less time required, the stronger the signal.
- If two or more trades have been opened near a particular level based on false signals, all subsequent signals from that level should be ignored.
- During sideways market conditions, any currency pair may generate numerous false signals or none at all. Technical levels may also be ignored by the market.
- On the hourly timeframe, it is advisable to trade MACD indicator signals only when market volatility is sufficient and a clear trend is confirmed by a trendline or trend channel.
- If two levels are located too close to each other (within 5–20 points), they should be treated as a single support or resistance zone.
- Once the price has moved 15 points in the favorable direction, the Stop Loss should be moved to the breakeven level.
What the Charts Show:
Price support and resistance levels (zones) are levels that serve as targets for opening buy or sell positions or as sources of trading signals.
Red lines represent channels or trendlines that indicate the current market trend and show the preferred trading direction.
The MACD indicator (14, 22, 3), consisting of a histogram and a signal line, is an auxiliary indicator that can also be used to generate trading signals.
Important speeches and economic reports (listed in the economic calendar) can have a significant impact on currency pair movements. Therefore, traders should exercise extreme caution when such events are released or consider closing their positions to avoid sudden price reversals against the prevailing market direction.
Beginner forex traders should remember that not every trade can be profitable. Developing a clear trading strategy and applying sound money management are essential for long-term trading success.
