Analysis of Monday's Trades:
1H Chart of the GBP/USD Pair
The GBP/USD pair also traded logically only at the market open on Monday after the weekend. Throughout the day, there was again a strengthening of the American currency, which cannot be connected to anything specific. However, according to the current trend on the hourly timeframe, everything is logical. The British pound continues to decline amid weak UK data, while the U.S. dollar keeps rising on any data. Therefore, while the current movement may still be termed logical from a technical standpoint, it is not from a fundamental or macroeconomic perspective. Thus, as before, we only expect the pair to rise, but for that to happen, at least a breakthrough of the trend line is now required. This week, there will be relatively few important events and reports, and Donald Trump's renewed trade war has not posed any issues for the dollar. Thus, the best approach now is to trade without being tied to fundamentals and macroeconomics, focusing on technical levels and areas.
5M Chart of the GBP/USD Pair
On the 5-minute timeframe, five trading signals were generated on Monday. At the very beginning of the European trading session, the price bounced off the area of 1.3529-1.3543, then dropped and broke through the area of 1.3484-1.3489. However, the subsequent decline was short-lived. Just 30 minutes later, a buy signal formed. Nonetheless, the short position still yielded a profit. The price subsequently bounced off the 1.3484-1.3489 area twice more, but we did not see any significant movement afterward.
How to Trade on Tuesday:
On the hourly timeframe, the GBP/USD pair continues to form a downward trend. There are no global factors driving medium-term dollar growth, so we expect the global upward trend from 2025 to continue in 2026, which may push the pair to at least the 1.4000 mark. In recent weeks, the situation has frequently played against the British currency, but the market has not factored in any negativity from the U.S.
On Tuesday, novice traders may consider opening long positions if the pair consolidates above the area of 1.3484-1.3489, with a target of 1.3529-1.3543. A price consolidation below the area of 1.3484-1.3489 will allow for opening short positions with a target of 1.3437-1.3446.
On the 5-minute timeframe, it is currently possible to trade around the levels of 1.3319-1.3331, 1.3365, 1.3403-1.3407, 1.3437-1.3446, 1.3484-1.3489, 1.3529-1.3543, 1.3643-1.3652, 1.3695, 1.3741-1.3751, 1.3814-1.3832, 1.3891-1.3912, 1.3975. On Tuesday, there are no major events scheduled in the UK or the U.S., aside from the weekly ADP labor market report. Therefore, volatility today is unlikely to be high.
Main Rules of the Trading System:
- The strength of the signal is determined by the time it takes to form (rebound or breaking through the level). The shorter the time, the stronger the signal.
- If two or more trades were opened around a particular level based on false signals, all subsequent signals from that level should be ignored.
- In a flat market, any pair can generate numerous false signals or no signals at all. In any case, it is best to stop trading at the first signs of a flat.
- Trades are opened during the time period between the start of the European session and until the middle of the American session, after which all trades should be manually closed.
- On the hourly timeframe, signals from the MACD indicator should ideally be traded only when there is good volatility and a trend confirmed by a trend line or channel.
- If two levels are too close to each other (ranging from 5 to 20 pips), they should be considered as a support or resistance area.
- After moving 20 pips in the correct direction, it is advisable to set the Stop Loss to break-even.
What's on the Charts:
- Support and resistance levels are targets for opening buy or sell trades. Take Profit levels can be placed around them.
- Red lines indicate channels or trend lines that reflect the current trend and indicate the preferred direction for trading now.
- The MACD indicator (14,22,3) – the histogram and signal line – serves as a supplementary indicator that can also be used as a source of signals.
- Important speeches and reports (always found in the news calendar) can significantly influence the movement of the currency pair. Therefore, during their release, trading should be conducted with maximum caution, or it is advised to 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 practicing sound money management are the keys to long-term trading success.
