1H chart of GBP/USD.
The GBP/USD pair also showed no significant price movements on Tuesday, and volatility remained minimal. However, the U.S. dollar began to decline across the market overnight as the first results of the U.S. congressional elections started to come in. The initial results point to a decisive victory for the Democrats. However, vote counting has not yet begun in all U.S. states, so the defeat of Trump's opponents should not be treated as a foregone conclusion. The Democrats are likely to win, but they need to secure a majority in both chambers of Congress to be able to oppose the president on key issues. Therefore, the results will continue to be updated in real time throughout the day and may change accordingly. Meanwhile, the market will be closely monitoring every development while also preparing for the Bank of England meeting and important U.S. macroeconomic data releases. As a result, the market could experience considerable turbulence several times before the end of the week.
5M chart of GBP/USD.
No trading signals formed on the 5-minute timeframe on Tuesday. Overnight, the price reached the 1.3456–1.3476 level, where signals may now be expected to form.
How to Trade on Wednesday:On the hourly timeframe, GBP/USD continues to develop an upward trend. Overall, the British pound is trading much more consistently than the euro, giving it a good chance of continuing its upward trend. The technical picture across almost all timeframes supports further appreciation of the British pound. The fundamental backdrop and the U.S. dollar's overbought condition also support further gains in GBP/USD.
On Wednesday, beginners may consider short positions targeting 1.3380–1.3386 if the price rebounds from the 1.3456–1.3476 level. Long positions may be opened with a target of 1.3587–1.3598 if the price breaks above the 1.3456–1.3476 level.
On the 5-minute timeframe, trading can currently be based on the following levels: 1.3043, 1.3096–1.3107, 1.3175–1.3180, 1.3259–1.3267, 1.3319–1.3331, 1.3380–1.3386, 1.3456–1.3476, 1.3587–1.3598, and 1.3631–1.3641. No important events or data releases are scheduled in the UK on Wednesday. However, the results of the U.S. congressional elections will become available today, along with the release of the relatively important ADP and ISM reports, which are unlikely to go unnoticed by the market. Numerous important events are also scheduled for the remaining two trading days of the week. Therefore, the price may change direction several times before the end of the week, and high volatility is expected.
Key Rules of the Trading System:Signal strength is determined by the time required for a signal to form (a rebound from or a breakout of a level). The less time required, the stronger the signal.If two or more trades have been opened near a particular level based on false signals, all subsequent signals from that level should be ignored.In a sideways market, any currency pair may generate numerous false signals or none at all. Technical levels may be disregarded by price action.On the hourly timeframe, MACD signals should preferably be traded only when volatility is sufficient and the trend is confirmed by a trendline or trend channel.If two levels are located too close to each other (5–20 points apart), they should be treated as a support or resistance area.Once the price has moved 15 points in the favorable direction, the Stop Loss should be moved to breakeven.What the Charts Show:Support and resistance price levels (areas) are levels that serve as targets for buy or sell trades or as sources of trading signals.
Red lines represent channels or trendlines that illustrate the current trend and indicate the preferred trading direction.
The MACD indicator (14, 22, 3) consists of a histogram and a signal line. It is a supplementary indicator that can also be used to generate trading signals.
Important speeches and economic reports (listed in the economic calendar) can have a significant impact on currency pair movements. Therefore, trading should be approached with extreme caution when these events are released, or positions should be closed to avoid a sudden price reversal against the preceding movement.
Beginner forex traders should remember that not every trade can be profitable. Developing a clear trading strategy and applying sound money management are essential to long-term trading success.