Analysis of Tuesday's Trades

1H Chart of GBP/USD

The GBP/USD pair also showed a relatively strong upward move, but unlike EUR/USD, it began rising from early morning. Data from the UK supported the strengthening of the British pound. While we cannot say the data was exceptionally positive, it did come in slightly better than forecasts. In particular, the unemployment report unexpectedly showed a decline in the number of unemployed. Moreover, given the current fundamental background, the pound does not need much to continue growing. Later in the day, the US inflation report gave traders a new opportunity to sell the dollar actively. Inflation in the US remained unchanged in July, sharply increasing the already almost 100% probability of a Federal Reserve key rate cut in September. Furthermore, weak labor market data over the past three months significantly raises the likelihood of a rate cut at every meeting until the end of the year, with inflation posing no obstacle to this process.

5M Chart of GBP/USD

On the 5-minute timeframe, many trading signals formed on Tuesday. The first signal appeared in the morning with a bounce from the 1.3413–1.3421 area. A few hours later, the 1.3466–1.3475 area was tested. Long positions should have been closed there, and short positions opened. Before the inflation release, it would have been prudent to either set a stop loss to break even or close the short trade. The price then formed two buy signals near the 1.3466–1.3475 area; the second one could have been traded. Toward the end of the day, the pair twice bounced from the 1.3518–1.3525 area, which allowed longs to be closed and even shorts to be opened.

Trading Strategy for Wednesday:

On the hourly chart, the GBP/USD pair indicates that the downtrend has ended. Given the events of the last two weeks, we would not bet a penny on the US currency's growth. The dollar continues to fall steadily and consistently. A new ascending trendline is supporting the bulls, and there will only be grounds to expect a decline in the pair after the price consolidates below it.

On Wednesday, GBP/USD may take a short pause as there will be no macroeconomic or fundamental background today. Thus, a bounce from the 1.3518–1.3532 area can be used to hold shorts targeting 1.3475. Meanwhile, a bounce from the 1.3466–1.3475 area or consolidation above 1.3518–1.3532 would allow opening long positions.

On the 5-minute chart, trading can now be carried out around the levels 1.3102–1.3107, 1.3203–1.3211, 1.3259, 1.3329–1.3331, 1.3413–1.3421, 1.3466–1.3475, 1.3518–1.3532, 1.3574–1.3590, 1.3643–1.3652, 1.3682, 1.3763. No significant events are scheduled in the UK or the US for Wednesday, so volatility may be low, and there may be no intraday trend.

Core Trading System Rules:

1. Signal Strength: The shorter the time it takes for a signal to form (a rebound or breakout), the stronger the signal.
2. False Signals: If two or more trades near a level result in false signals, subsequent signals from that level should be ignored.
3. Flat Markets: In flat conditions, pairs may generate many false signals or none at all. It's better to stop trading at the first signs of a flat market.
4. Trading Hours: Open trades between the start of the European session and the middle of the US session, then manually close all trades.
5. MACD Signals: On the hourly timeframe, trade MACD signals only during periods of good volatility and a clear trend confirmed by trendlines or trend channels.
6. Close Levels: If two levels are too close (5–20 pips apart), treat them as a support or resistance zone.
7. Stop Loss: Set a Stop Loss to breakeven after the price moves 20 pips in the desired direction.

Key Chart Elements:

Support and Resistance Levels: These are target levels for opening or closing positions and can also serve as points for placing Take Profit orders.

Red Lines: Channels or trendlines indicating the current trend and the preferred direction for trading.

MACD Indicator (14,22,3): A histogram and signal line used as a supplementary source of trading signals.

Important Events and Reports: Found in the economic calendar, these can heavily influence price movements. Exercise caution or exit the market during their release to avoid sharp reversals.

Forex trading beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are essential for long-term trading success.