Analysis of Thursday's Trades

1H Chart of GBP/USD

The GBP/USD pair continued its downward trend on Thursday, despite the lack of any local catalysts. There were no data releases or events from the UK or the US yesterday that could have prompted another decline in the British currency, and the same was true for Wednesday.

As a result, this week's drop in the pound appears to be driven solely by technical factors following the primary trend. When considering broader global factors, these have remained constant. We have often pointed out that the pound is overbought and unjustifiably expensive. The market has been anticipating only monetary policy easing from the Federal Reserve for the past two years, while the state of the U.S. economy is significantly stronger than that of the UK.

Thus, there are many reasons for the pound to decline, and these factors are likely to persist. The pound continues to fall, even if it seems that no immediate catalysts are present—because, in reality, they are.

5M Chart of GBP/USD

On the 5-minute timeframe, several trading signals were generated on Thursday. Initially, the currency pair consolidated below the 1.2310 level and then fell to 1.2235. This move alone could have resulted in a solid profit for novice traders. Following this, buy signals appeared with rebounds from the 1.2235 and 1.2270 levels, which could have also been executed profitably. The movement concluded near the 1.2310 level, where long positions could have been closed for a profit.

Trading Strategy for Friday:

On the hourly timeframe, the GBP/USD pair has exited the New Year's flat range and resumed its primary downtrend. In the medium term, we are fully supportive of the pound's decline, as we believe this is the most rational outcome. Therefore, we anticipate further downside; however, as always, be sure to rely on technical signals for your trade entries.

On Friday, the GBP/USD exchange rate may move in any direction, with U.S. macroeconomic data being the key factor influencing its movement.

For the 5-minute timeframe, the following trading levels are relevant: 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 or reports scheduled in the UK on Friday; however, four important reports will be released in the U.S. As a result, major price movements are anticipated during the American session, which could be strong and unexpected.

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.