The GBP/USD pair continued its somewhat weak upward movement above the ascending channel on Friday. Thus, the upward trend is definitely maintained. The British pound should continue to rise even without support from the U.S. Treasury, as all possible factors in the currency market currently indicate this. However, the U.S. Treasury has only helped and accelerated this process. We see no reason to strengthen the American dollar, except perhaps if the geopolitical conflict in the Middle East spills over beyond the region or if a new war begins globally. In that case, the dollar would again serve as a safe-haven asset, and demand for it would rise. On Friday, relatively good business activity indices and a neutral retail report were released in the UK. This data did not provide strong support for the British pound. American business activity indices, in turn, did not significantly support the dollar, as the market prefers to draw conclusions from ISM indices. Volatility was low on Friday.
5M Chart of the GBP/USD PairIn the 5-minute timeframe, four trading signals were generated on Friday, but all were false. The pair traded with minimal volatility that day and mostly sideways. Novice traders could have acted on the first two signals. The first buy trade closed at stop-loss at breakeven. The second long position resulted in a small loss.
How to Trade on Monday:On the hourly timeframe, the GBP/USD pair maintains an upward trend. In our opinion, the British pound should continue to rise, even if local factors do not support it. The weekly timeframe continues moving from the lower boundary of the sideways channel toward the upper boundary, and this movement is not yet complete. The market's faith in a Federal Reserve rate hike in September is visibly waning, as recent macroeconomic data and events have put pressure on the dollar. Only a consolidation below the ascending channel on the hourly timeframe would allow for expectations of a decline in the pair.
On Monday, novice traders may consider opening short positions if consolidation occurs below the 1.3631-1.3641 area, targeting 1.3587-1.3598. Long positions can be opened with a target of 1.3695 if the price bounces from the 1.3631-1.3641 area.
On the 5-minute timeframe, trading can currently be done at the following levels: 1.3259-1.3267, 1.3319-1.3331, 1.3380-1.3386, 1.3456-1.3476, 1.3587-1.3598, 1.3631-1.3641, 1.3695, and 1.3741. There are no significant events or publications scheduled for Monday in the UK and the U.S., so volatility may again be weak throughout the day. Today, trading will have to rely solely on technical factors.
Main Rules of the Trading System:The strength of the signal is assessed based on the time it took to form (bounce or level breakthrough). The less time required, the stronger the signal.If two or more trades are opened around a certain level based on false signals, all subsequent signals from that level should be ignored.In a flat, any pair can generate a plethora of false signals or none at all. Technical levels may be disregarded.When trading based on MACD signals on the hourly timeframe, it is advisable to do so only when volatility is high and a trend line or channel supports the trend.If two levels are too close to each other (from 5 to 20 pips), they should be regarded as a support or resistance area.After a 15-pip move in the correct direction, a Stop Loss should be set to break even.What the Charts Show:Support and resistance price levels (areas) are the targets when opening buy or sell orders or sources of signals.
Red lines denote channels or trend lines that reflect the current trend and indicate in which direction trading is currently favored.
The MACD indicator (14,22,3) – histogram and signal line – is a supporting indicator that can also be used as a source of signals.
Important speeches and reports (as listed in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be approached with utmost caution, or one should exit the market to avoid sharp price reversals against the preceding movement.
Beginners in Forex trading should remember that not every trade can be profitable. Developing a clear strategy and proper money management are essential for long-term trading success.