FX.co ★ How to Trade The GBP/USD Currency Pair on October 15? Simple Tips and Trade Analysis for Beginners

Review of Wednesday's trades:

1H chart of the GBP/USD pair

The GBP/USD pair plunged during Wednesday and then almost fully recovered. From our point of view, after the US inflation report, we saw another wholly illogical dollar rally. Although consumer prices were stronger, the report changes nothing in the Federal Reserve's policy outlook. If inflation had overshot by 0.3–0.5%, it might have implied Fed forecasts were wrong and required a larger rate increase, in which case dollar strength would be justified. A 0.1% miss versus forecast changes nothing. We believe the pound's subsequent recovery is more important than the prior fall. Perhaps the market has become saturated with baseless dollar buying and is starting to take profits. This is a critical moment — a moment when the dollar's illogical rally could end.

5M chart of the GBP/USD pair

On the 5-minute timeframe on Wednesday, three trading signals formed. First, the pair closed below the 1.3259–1.3267 area, then broke below the 1.3175–1.3180 area, and finally broke back above the 1.3175–1.3180 area. Each signal offered novice traders opportunities, but the last buy signal was the safest.

How to trade on Thursday:

On the hourly timeframe, the GBP/USD pair continues a downward tendency that has become a full, strong trend. The dollar's fundamental backdrop improved after the Fed signaled it was ready to begin tightening. However, a month has passed, and the market keeps buying the dollar on any pretext. Thus, we seriously doubt that Fed policy alone is driving the dollar's strength. We view the current move as illogical, inertia-driven and speculative.

On Thursday, novice traders may consider short positions targeting 1.3175–1.3180 if price rebounds from the 1.3259–1.3267 area. Open long positions with a target of 1.3319–1.3331 if price closes above the 1.3259–1.3267 area.

On the 5-minute timeframe consider trading the 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, 1.3631–1.3641. On Thursday, the UK will publish not particularly important industrial-production and monthly GDP figures, and the US will release relatively minor industrial-production and retail-sales reports. The market may react to these releases, but the response is unlikely to be strong. We expect the pound's recovery to continue.

Key Rules of the Trading System:

1. The strength of a signal is determined by the time it takes to form the signal (rebound or breakout). The less time taken, the stronger the signal.
2. If two or more trades were opened at a certain level based on false signals, all subsequent signals from that level should be ignored.
3. In a range (flat), any pair can generate many false signals or may not produce any at all. Technical levels may be disregarded.
4. On the hourly timeframe, trading signals from the MACD indicator should be acted upon only when volatility is high, and a trend line or trend channel confirms the trend.
5. If two levels are too close together (within 5-20 pips), treat them as a support or resistance area.
6. After moving 15 pips in the right direction, a stop-loss should be set to break even.

What to Look for on the Charts:

Price levels (areas) of support and resistance serve as targets for opening buy or sell trades or as sources of signals.

Red lines indicate channels or trend lines that show the current trend and the preferred trading direction.

The MACD indicator (14,22,3) — the histogram and signal line — is an auxiliary indicator that can also provide signals.

Important speeches and reports (listed in the news calendar) can significantly influence currency pair movements. Therefore, during their release, traders should approach trading with utmost caution, or exit the market to avoid sudden reversals against the preceding move.

Beginner forex traders should remember that not every trade can be profitable. Developing a clear strategy and practicing money management are key to long-term success in trading.