Trade Analysis for Monday:
1H Chart of GBP/USD
The GBP/USD pair showed a decent recovery on Monday amid a decrease in geopolitical tensions. It became known that Tehran and Washington may return to the negotiating table. While there is still a long way to go before a peace agreement, the market reacted positively to this news, as it offers hope for long-term peace in the Middle East. As the saying goes, hope springs eternal. No other significant news emerged throughout the day. A downward trend began to form for the British pound last week, and Monday's news is currently insufficient to conclude this trend. However, we do not believe the US dollar will continue to strengthen unless a full-scale war between Iran and the US allies resumes. Moreover, Trump does not seem inclined to initiate a new military operation. Therefore, this week, the British pound and the euro may continue their recovery.
5M Chart of GBP/USD
On the 5-minute timeframe, three trading signals were formed on Monday. At the beginning of the European trading session, the pound broke through the area of 1.3319-1.3331, then a few hours later, it worked through and bounced from the area of 1.3380-1.3386, and a couple of hours later, it broke through that area as well. Thus, novice traders could have opened two long positions and one short position. The long positions yielded profit, while the short position closed at breakeven as the price fell more than 20 pips.
How to Trade on Tuesday:
On the hourly timeframe, the GBP/USD pair continues to reflect a downward trend, unable to withstand the geopolitical pressure from last week. However, without a resumption of full-scale war in the Middle East, the dollar cannot expect to grow as it did in February and March. Individual events may still provoke a strengthening of the US dollar, but we do not believe the market will initiate a new wave of flight to the US dollar.
On Tuesday, novice traders can open short positions targeting 1.3380-1.3386 if the price bounces from the 1.3456-1.3476 area. A consolidation above the area of 1.3456-1.3476 or a bounce from the area of 1.3380-1.3386 will allow for the opening of long positions.
On the 5-minute timeframe, the following levels can be considered for trading: 1.3175-1.3180, 1.3259-1.3267, 1.3319-1.3331, 1.3380-1.3386, 1.3456-1.3476, 1.3587-1.3598, 1.3631-1.3641, 1.3695, 1.3741-1.3751. Today, the UK will release reports on unemployment, jobless claims, and wages. These data may provoke a slight market reaction. In the US, only a tertiary ADP weekly report is scheduled.
Main Rules of the Trading System:
- The strength of the signal is determined by the time it took to form the signal (bounce or breakout of the level). The less time it took, the stronger the signal.
- If two or more trades were opened near any level based on false signals, all subsequent signals from this level should be ignored.
- In a flat market, any pair can generate many false signals or none at all. Technical levels may be ignored.
- On the hourly timeframe, it is preferable to trade signals from the MACD indicator only in the presence of good volatility and a trend that is confirmed by a trend line or trend channel.
- If two levels are too close together (5-20 pips apart), treat them as a support or resistance zone.
- After a move of 15 pips in the right direction, a Stop Loss should be set to breakeven.
What is on the Charts:
Price levels (areas) of support and resistance – levels that are targets when opening purchases or sales, or sources of signals.
Red lines – channels or trend lines that display the current trend and indicate which direction is preferable to trade now.
MACD indicator (14, 22, 3) – histogram and signal line – a supporting indicator that can also be used as a source of signals.
Important speeches and reports (contained in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be done as cautiously as possible, or one should 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 sound money management are key to long-term trading success.
