Analysis of Wednesday's Trades

1H Chart of GBP/USD

The GBP/USD pair maintained its upward trend on Wednesday, a movement that has developed over the past two weeks. Recall that the last bout of U.S. dollar strength occurred on news that mutual tariffs between the U.S. and China would be reduced by 115%. Many believed this would lead to further de-escalation in the trade war, which may be the case. However, even this news has failed to provide meaningful support for the U.S. dollar. Since Monday of this week, there hasn't been any "terrible" news for the dollar. The downgrade of the U.S. credit rating is certainly negative, but not disastrous enough to justify the dollar's daily decline. The recent macroeconomic landscape has been largely uneventful, except for the UK inflation report, which added further pressure on the dollar. What we're witnessing is obvious: the dollar is being sold off for any reason, even on days when there are no reasons.

5M Chart of GBP/USD

Several signals were formed in the 5-minute timeframe on Wednesday, but none were particularly strong. Initially, the pair consolidated above the 1.3421–1.3440 area following the release of the UK inflation report. Novice traders could have entered long positions then, but the pound failed to extend the upward movement. Later, the pair generated two sell signals around the same area but could not produce any decent follow-through in both cases. The second trade closed at breakeven, while the third wasn't worth executing given the false nature of the previous signals.

Trading Strategy for Thursday:

In the hourly timeframe, GBP/USD continues to be driven primarily by sentiment toward Donald Trump and ongoing skepticism about his policies. Let's not forget: signing a trade deal between the U.S. and the UK and lowering tariffs between the U.S. and China should benefit the dollar, not the pound. A rate cut by the Bank of England and stable rates from the Federal Reserve should also favor the dollar. Yet, the opposite is happening in reaction and price movement.

On Thursday, GBP/USD will likely trade again based mostly on technical factors. The market will continue looking for any excuse to sell the dollar or wait for fresh news. Day by day, nothing seems to change in the market environment.

On the 5-minute chart, the relevant trading levels are 1.2848–1.2860, 1.2913, 1.2980–1.2993, 1.3043, 1.3102–1.3107, 1.3203–1.3211, 1.3259, 1.3329–1.3331, 1.3421–1.3443, 1.3537, 1.3580–1.3598. On Thursday, service and manufacturing PMI reports are scheduled for release in both the UK and the U.S., but they are unlikely to derail the bullish sentiment among traders—in fact, they may even strengthen it.

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.