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The GBP/USD pair also experienced a significant drop on Wednesday, triggered by the U.S. presidential elections. As we mentioned, there is no logical correlation between Donald Trump's possible victory and the dollar's growth. This was purely an emotional market reaction to a major fundamental event.
The pound is already recovering, and if not for the two central bank meetings today, we expect the pound to rise back to Tuesday's levels. However, the Bank of England will first announce its meeting results, which could lead to another drop in the pound. Later, the Federal Reserve will announce its decisions, potentially sparking any market reaction. No one can predict the tone that Jerome Powell and Andrew Bailey will take in advance, making it pointless to forecast the pair's movement on Thursday.
On the 5-minute time frame Wednesday, the price traded mostly sideways during the European and U.S. trading sessions. Several decent trading signals were formed around the 1.2848-1.2860 zone and the 1.2913 level. However, as mentioned earlier, trading on Wednesday was risky, as the price could easily have moved in any direction.
In the hourly time frame, the GBP/USD pair failed to start a correction after a month-long decline. In the medium term, we fully support a further drop in the pound, as this seems to be the most logical outcome. In the short term, the pound may attempt another correction, but for that to happen, it will need support from the BoE and the Fed.
For Thursday, novice traders should be prepared for any outcome, as the price could continue fluctuating in either direction.
On the 5-minute timeframe, consider trading around the following levels: 1.2791-1.2798, 1.2848-1.2860, 1.2913, 1.2980-1.2993, 1.3043, 1.3102-1.3107, 1.3145-1.3167, 1.3225, 1.3272, 1.3365. Novice traders should pay close attention to the BoE and Fed meetings and even more so to the speeches by Bailey and Powell. The first meeting will occur during the day, so the U.S. session could see the price fluctuating heavily. Increased volatility is also expected in the evening.
Support and Resistance Levels: Levels that serve as targets for opening buys or sells. Take Profit levels can be placed around these areas.
Red Lines: Channels or trend lines that indicate the current trend and the preferred trading direction.
MACD Indicator (14,22,3): Histogram and signal line—an auxiliary indicator that can also be used as a source of signals.
Major speeches and reports (always found in the news calendar) can significantly impact currency pair movements. Therefore, it's advised to trade cautiously or exit the market during their release to avoid sharp price reversals against prior movements.
Beginners trading on the forex market should remember that not every trade will be profitable. A clear strategy and money management are the keys to success in long-term trading.
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