The Pound (GBP) Finally Has A Chance To Start The Downtrend
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Analyzing Thursday's trades:
GBP/USD on 30M chart
GBP/USD lost more than 200 pips on Thursday and its movements were not the same as EUR/USD, although the impact of the results of the Federal Reserve meeting turned out to be the same for both pairs, the impact of the European Central Bank and the Bank of England both raising their rates synchronously by 0.5% had a different impact on the pound. The EU also announced the start (next year) of the quantitative tightening program, which could support the euro for a while... However, now we are talking about the pound. The first thing to take note of is that the pair did collapse, and such a fall could theoretically be the start of a new downtrend. Next, the price has settled below the weak ascending trend line. Third, the market at last has stopped thoughtlessly buying the pound, even when there is no reason for it. The BoE only provided dry information after the meeting, as it said that it was ready to continue to hike rates, but the pace of its growth has already slowed. Recession in the British economy has already begun, unemployment will rise, households and the real estate market are experiencing problems. Inflation may have passed its peak (or it may not, as it has only dropped once so far).
GBP/USD on M5 chart
Despite the fact that there was nearly a sharp plunge yesterday, the trading signals were not appealing. Let's start with the fact that GBP started falling at night, so it was impossible to catch its start. In the middle of European session and in the beginning of US one (when the BoE announced the results of its meeting) the pair hovered near the area of 1.2329-1.2337, making around three sell signals. In the first two cases, the pair was down by at least 20 pips, so both short positions were closed with Stop Loss at breakeven. But the third sell signal could be stopped, because the first two signals turned out to be false (though they didn't bring losses). And it was after this signal that the pound started to fall sharply. The last two sell signals should not be used, since by that time the pair had already gone most of the way down. The day ended without profit and without loss.
Trading tips on Friday:
On the 30-minute chart, the pound finally has a chance to start the downtrend, it has crossed the trend line. Of course, this week's movements were provoked by the fundamental backdrop, and next week the market may resume its groundless purchases of the pound. But nevertheless for the first time in a long time we have real signals of a strong bearish correction, which we have been waiting for a long time. On the 5-minute TF on Friday, it is recommended to trade at the levels 1.1950-1.1957, 1.2064-1.2079, 1.2141, 1.2186-1.2205, 1.2245-1.2260, 1.2337-1.2343, 1.2444.. As soon as the price passes 20 pips in the right direction, you should set a Stop Loss to breakeven. On Friday, business activity indexes of services and manufacturing for December will be published in the UK and the US. There might be a reaction, but only if the reports deviate from the forecasted values.
Basic rules of the trading system:
1) The strength of the signal is determined by the time it took the signal to form (a rebound or a breakout of the level). The quicker it is formed, the stronger the signal is.
2) If two or more positions were opened near a certain level based on a false signal (which did not trigger a Take Profit or test the nearest target level), then all subsequent signals at this level should be ignored.
3) When trading flat, a pair can form multiple false signals or not form them at all. In any case, it is better to stop trading at the first sign of a flat movement.
4) Trades should be opened in the period between the start of the European session and the middle of the US trading hours when all positions must be closed manually.
5) You can trade using signals from the MACD indicator on the 30-minute time frame only amid strong volatility and a clear trend that should be confirmed by a trendline or a trend channel.
6) If two levels are located too close to each other (from 5 to 15 pips), they should be considered support and resistance levels.
On the chart:
Support and Resistance levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are channels or trend lines that display the current trend and show in which direction it is better to trade now.
The MACD indicator (14, 22, and 3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend patterns (channels and trendlines).
Important announcements and economic reports that can be found on the economic calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommend trading as carefully as possible or exiting the market in order to avoid sharp price fluctuations.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management is the key to success in trading over a long period of time
Relevance up to 02:00 2022-12-17 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
