Analysis of Tuesday's Trades

1H Chart of GBP/USD

The GBP/USD pair continued its upward movement on Tuesday, which began on Monday. Yesterday, the market had valid reasons to buy the pound; today, even more reasons may emerge. We previously noted that the primary factor supporting the British pound is the extremely slow pace of monetary policy easing by the Bank of England. The macroeconomic backdrop is bolstering this factor.

Yesterday, data showed that average wages in the UK rose to 5.2%, significantly exceeding the expectations of the Bank of England and analysts. Rising wages indicate that inflation is likely to accelerate further. Within an hour, the UK will release its inflation report, which could confirm this hypothesis. Tomorrow, the BoE will hold its meeting, during which it is highly likely that the interest rate will be left unchanged. This set of factors is driving the pound higher.

However, the ongoing three-week upward movement is still classified as a correction. Therefore, we are waiting for this correction to conclude.

5M Chart of GBP/USD

On the 5-minute timeframe, several trading signals were formed on Tuesday, but traders largely ignored the crucial 1.2680–1.2685 area throughout the day. In other words, buyers forcibly pushed the pound through this area, making the signals around it very inaccurate, if they can even be considered signals. Novice traders could open long positions following the release of UK data. The nearest target level of 1.2723 was reached.

Trading Strategy for Wednesday:

On the hourly timeframe, the GBP/USD pair has presumably completed its upward correction, but there is no certainty or guarantee. In the medium term, we fully support the pound's decline, as we believe this is the only logical outcome. Therefore, we expect the British currency to continue declining soon. However, this week, close attention should be paid to fundamental and macroeconomic factors which are currently pushing the pound higher.

For Wednesday, novice traders can trade again from the 1.2680–1.2685 area, but the fundamental and macroeconomic backdrop may significantly affect the accuracy of technical signals today.

On the 5-minute timeframe, trading can currently be conducted at the following levels: 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 Wednesday, the UK will release its inflation report, which significantly impacts the BoE's policies. In the US, the FOMC meeting will take place, a significant event in its own right.

Core Trading System Rules:

1. Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
2. False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
3. 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.
4. Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
5. 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.
6. Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
7. 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.