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Hourly chart of the GBP/USD pair
The GBP/USD pair began to move down on Thursday. Overcoming the 1.3610 level, which we called the lower border of the horizontal range, opened up excellent growth prospects for the dollar. However, the pair continues to trade in an absolutely unpredictable and illogical manner. Therefore, instead of a logical downward movement, we got an illogical upward movement. In our previous review for the pound, we advised you to consider trading bearish, but only on a new strong sell signal from MACD. For Thursday and the first half of Friday, such a signal was generated during the evening, which was just a few hours ago. No such signals were generated on Thursday, and this is for the best, as they could get big losses due to a 100-point candlestick in the middle of the day. But it is quite possible to try to work the signal that was formed a few hours ago. First, from our point of view, yesterday's growth was absolutely illogical. The Bank of England did not make any decisions that could provoke the pound's growth. Secondly, yesterday's breakdown of the 1.3610 level still gives some hope for a downward movement. But in general, we continue to draw your attention to the fact that this is one of the most inconvenient times to trade the pound/dollar pair.
The key event for Thursday was the Bank of England meeting. Novice traders should clearly understand why these meetings are so important. The country's main bank can announce changes in monetary policy - in fact, a set of tools for influencing the economy. It is believed that the BoE can tighten or ease monetary policy. In the first case, it is assumed that the economy is doing well and does not need stimulation. In the second case, it needs stimulation and feels bad (as now). Therefore, if the Bank of England announces policy easing or softens it (for example, lowers the key rate or increases the stimulus program), this would be a dovish decision and can cause the national currency to weaken. If the central bank does nothing, then usually there is no market reaction. Yesterday the Bank of England did nothing, and in its cover letter it was speculating that negative rates may be introduced, but this is inaccurate, and it is not known when they will be introduced, but commercial banks, just in case, should prepare for this decision. No specifics. Consequently, the pound should not have grown either. As in the past few months.
Possible scenarios on February 5:
1) Long positions ceased to be relevant, since the price surpassed the upward trend line and failed to go beyond the 1.3744 level. So, now you need to wait for the upward trend to resume in order to be able to trade bullish again. The current movement can hardly be called downward, upward or flat. This is a "swing" - random movements in different directions.
2) Short positions are slightly more relevant at the moment. Following an absolutely illogical growth from yesterday, now we can expect a round of downward movement. But novice traders should understand that there is no trend line, no side channel, nothing that could help identify the nature of the current movement. Therefore, you can open sell positions while aiming for 1.3610 and 1.3589 solely at your own peril and risk. The probability of a decline is 55%, that is, not much higher than the further up, to the 1.3744 level.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.
The MACD indicator consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
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