Trade review for Thursday:

1H chart of the GBP/USD pair

The GBP/USD pair moved higher on Thursday, even though the ECB meeting and Christine Lagarde's remarks had little to do with the pound, and U.S. GDP and inflation reports favored the dollar. We have repeatedly stressed that "technicals" are the primary driver for sterling right now. Technicals point to a move from the daily channel's lower boundary toward its upper boundary — i.e., toward about 1.3650. Remember that the U.S. dollar appears overbought and arguably overpriced, because the market has spent recent months trading in expectations of further Federal Reserve tightening, a possible renewal of conflict in the Middle East, and so on. Many positive factors for the pound have been ignored. Therefore, sterling's rise can and should continue even without fresh fundamental or macro support. Next week, the Bank of England is expected to begin its rate-hike cycle, and the market has not yet fully priced that in.

5M chart of the GBP/USD pair

On the 5-minute timeframe, three trade signals formed on Thursday. Price first bounced from the 1.3319–1.3331 area, then closed above it, and finally cleared the 1.3380–1.3386 zone. Thus, the first short position was unprofitable, but the next long position was profitable, and the last buy signal lets traders stay in long positions into Friday.

How to trade on Friday:

On the hourly timeframe, GBP/USD continues forming an uptrend. Sterling has shown, and continues to show, greater resilience versus the dollar, so it has a better chance of an uptrend than the euro. The technical picture across timeframes supports sterling's rise. The fundamental backdrop and the dollar's stretched condition also support GBP/USD.

On Friday, novice traders can consider short positions targeting 1.3319–1.3331 if price holds below the 1.3380–1.3386 area. Keep long positions with targets of 1.3456–1.3476, since price has closed above the 1.3380–1.3386 area.

On the 5-minute TF 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. No important UK or U.S. releases are scheduled for Friday — the notable news flow will come from the euro area. Nevertheless, sterling may continue to advance even without news support.

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.