FX.co ★ How to Trade the GBP/USD Currency Pair on May 7? Simple Tips and Trade Analysis for Beginners

Trade Analysis for Wednesday:

1H Chart of the GBP/USD Pair

The GBP/USD pair demonstrated growth on Wednesday amid positive news from the US and Iran. However, it is now clear that the market is not disregarding positive news and geopolitical events in general; rather, it prefers to focus on facts and events rather than on rumors and speculation. A prime example of this is Donald Trump's statements. The US president makes numerous contradictory remarks almost every day, leading the markets to distrust most of his announcements. As a result, the dollar is not rising, as there are currently no compelling reasons for it, even geopolitically. The European currency remains in an upward trend, but is also not rising as there are no local drivers or they are questionable. Yesterday, the ADP labor market report was published in the US, but it has always been considered secondary to the Non-Farm Payrolls. The dynamics of these indicators rarely align, so a strong ADP reading does not guarantee a strong Nonfarm figure.

5M Chart of the GBP/USD Pair

On the 5-minute timeframe, one trading signal was generated on Wednesday. During the European trading session, the British currency managed to surpass the 1.3587-1.3598 area, allowing the pair to rise an additional 30 pips. However, the upward impulse quickly faded, and within a few hours, quotes returned to the 1.3587-1.3598 range.

How to Trade on Thursday:

On the hourly timeframe, the GBP/USD pair maintains an upward trend but has been trading sideways for the past three weeks. Without a serious escalation in the Middle East, the dollar will no longer be able to sustain the growth it showed in February and March. Individual events may still trigger their strengthening, but overall, the geopolitical factor has faded into the background. The British currency continues to lean toward growth, as indicated by trends on the daily and weekly timeframes.

On Thursday, beginner traders can open short positions if the price consolidates below the 1.3587-1.3598 area, targeting 1.3456-1.3476. If the price consolidates above the 1.3587-1.3598 area, long positions can be initiated with a target of 1.3695.

On the 5-minute timeframe, trading levels to consider include: 1.3175-1.3180, 1.3259-1.3267, 1.3319-1.3331, 1.3380-1.3386, 1.3456-1.3476, 1.3587-1.3598, 1.3695, and 1.3741-1.3751. Today, the UK calendar of events is completely empty, while in the US, a secondary report on jobless claims will be released. The pair is likely to remain stagnant today unless influenced by geopolitical events.

Main Rules of the Trading System:

1. The strength of the signal is determined by the time it took to form the signal (bounce or breakout of the level). The less time it took, the stronger the signal.
2. If two or more trades were opened near any level based on false signals, all subsequent signals from this level should be ignored.
3. In a flat market, any pair can generate many false signals or none at all. Technical levels may be ignored.
4. On the hourly timeframe, it is preferable to trade signals from the MACD indicator only in the presence of good volatility and a trend that is confirmed by a trend line or trend channel.
5. If two levels are too close together (5-20 pips apart), treat them as a support or resistance zone.
6. After a move of 15 pips in the right direction, a Stop Loss should be set to breakeven.

What is on the Charts:

Price levels (areas) of support and resistance – levels that are targets when opening purchases or sales, or sources of signals.

Red lines – channels or trend lines that display the current trend and indicate which direction is preferable to trade now.

MACD indicator (14, 22, 3) – histogram and signal line – a supporting indicator that can also be used as a source of signals.

Important speeches and reports (contained in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be done as cautiously as possible, or one should exit the market to avoid a sharp price reversal against the preceding movement.

Beginners trading in the Forex market should remember that not every trade can be profitable. Developing a clear strategy and sound money management are key to long-term trading success.