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On Tuesday, the GBP/USD pair experienced a downward correction, although the British pound has been closely following the euro in recent days. While the movements of the euro can at least be explained in hindsight, the fluctuations of the pound appear entirely illogical. The German inflation data that presumably triggered the euro's rise on Monday and the European inflation data that seemingly caused the euro's decline on Tuesday had no direct connection to the British pound. Nevertheless, the movements of both currency pairs were nearly identical. Additionally, the euro tends to respect key levels and forms strong trading signals around them. In contrast, the British pound simply mimics the euro's movements, trying to superimpose them onto its own levels, which results in the creation of false signals.
On the 5-minute timeframe, as mentioned earlier, numerous signals were generated on Tuesday, most of which turned out to be false signals. The initial signal that formed overnight was promising; however, by the time the European trading session began, the price had moved too far from the signal's formation point, making it too late to enter that trade. Subsequently, five signals emerged around the 1.2547 level, but only the final sell signal around the 1.2502–1.2508 area had a realistic chance of being successful.
On the hourly timeframe, the GBP/USD pair has exited its holiday flat phase and resumed its primary trend. From a medium-term perspective, we fully anticipate a decline in the pound, as we believe this is the most logical outcome. Therefore, we expect further decreases, although trading decisions should always be based on technical signals. Over the past few days, the pound has closely followed the movements of the euro.
On Wednesday, the GBP/USD pair may continue the decline that began yesterday, especially since the important support level of 1.2502 has been breached. Additionally, the macroeconomic backdrop today is not expected to be strong.
On the 5-minute timeframe, trading levels can be identified as follows: 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, and 1.2980–1.2993. There are no significant events scheduled in the UK for Wednesday. In the US, reports on jobless claims and the ADP employment report will be released. This will be followed in the evening by the release of the formal FOMC minutes.
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.
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