Trade Analysis for Wednesday:

1H chart of the GBP/USD pair

The GBP/USD pair also moved lower on Wednesday for no clear local reason. However, unlike the euro, the pound has traded mostly sideways for about two weeks. So the pound shows more resilience and stability than the euro. Yesterday the only moderately important item was the Federal Reserve minutes, but as the pair's evening moves show, there was no reaction to that event — as expected. Remember that Fed minutes are largely a formality: they are published three weeks after the meeting and lose much of their immediacy. At least three important US economic reports have come out over the past three weeks that materially softened market hawkishness; those reports can't be reflected in the minutes, so the minutes' information has limited current relevance. The US dollar gained again seemingly out of nowhere — something markets have grown used to over the last month.

5M chart of the GBP/USD pair

On the 5-minute TF on Wednesday, one sell signal formed. During the Asian session, price broke the 1.3259–1.3267 area and spent the rest of the day drifting lower. Traders could have opened short positions at the European open, since price had not moved far from the signal point. By the end of the day, profits of roughly 40 pips could be taken.

How to Trade on Thursday:

On the hourly TF, the GBP/USD pair continues a downward move that has become a full-fledged, powerful trend. The fundamental backdrop for the dollar improved because the Fed signaled it was ready to continue tightening. However, three weeks have passed and the market still aggressively buys the dollar. Therefore, we strongly doubt Fed policy alone explains this. We view the move as illogical, inertia-driven and speculative.

On Thursday, novice traders can consider short positions with targets at 1.3096–1.3107 if price consolidates below 1.3175–1.3180. Open long positions with targets at 1.3259–1.3267 if price rebounds from 1.3175–1.3180.

On the 5-minute TF you can trade 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. No important events are scheduled in the UK on Thursday, and in the US only the weekly initial-jobless-claims report is due — a release that rarely triggers a market response. Thus, today's moves are likely to be technical and possibly low-volatility.

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.