Trade Review of Tuesday:

1H Chart of the GBP/USD Pair

The GBP/USD pair also showed a notable decline on Wednesday, which was triggered by US inflation rising 0.1% above forecasts on a monthly basis. It is clear that inflation in the US is rising and will likely continue to rise, but we have not seen the year-on-year figure for October. Therefore, it is impossible to draw definitive conclusions about how much prices increased in the US for the month. Nevertheless, the market reacted quite strongly, and some members of the Federal Reserve's monetary committee even began talking about a possible 0.5% policy tightening in December. We do not believe the US central bank will take such drastic measures, but formally yesterday the market had grounds to buy the dollar—perhaps not for very strong moves, but overall traders remain more inclined toward the dollar. The ascending trendline has been broken, so the pound may be in decline for a while. However, in the longer term, we still expect gains based on technical factors on the daily and weekly timeframes. Our target of 1.3650 remains unchanged.

5M Chart of the GBP/USD Pair

On the 5-minute timeframe, two excellent sell signals were formed on Tuesday. First, the price bounced precisely from the 1.3456–1.3476 area, then it confidently broke through the 1.3380–1.3386 zone. The pound finished the day around 1.3319–1.3331, where novice traders could have taken about 90 pips in profit.

How to Trade on Wednesday:

On the hourly timeframe, the GBP/USD pair has likely completed the formation of its uptrend. The pound generally trades more logically than the euro and therefore has a good chance of resuming an uptrend after the correction ends. The technical picture on almost all charts supports the pair's rise. Sideways channels on the daily and weekly timeframes do not imply a severe drop in the pound.

On Wednesday, novice traders may consider short positions with a target of 1.3259–1.3267 if the price consolidates below the 1.3319–1.3331 area. Long positions can be opened with a target of 1.3380–1.3386 after yesterday's bounce from the 1.3319–1.3331 zone.

On the 5-minute timeframe 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 major events are scheduled in the UK or the US on Wednesday, and the week's key report was released yesterday. Therefore, market volatility may be low today.

Main rules of the trading system:

1. Signal strength is judged by how long the signal took to form (a bounce or a breakout). The less time required, the stronger the signal.
2. If two or more false signals have been generated around a given level, all subsequent signals from that level should be ignored.
3. In a flat (range), any pair can produce many false signals or none at all. Technical levels can be ignored.
4. On the hourly timeframe, ideally trade MACD signals only when volatility is strong, and a trendline or trend channel confirms the trend.
5. If two levels are placed very close to each other (5–20 pips), treat them as a support/resistance area.
6. After a price moves 15 pips in the intended direction, move the Stop Loss to breakeven.

What is shown on the charts:

Price levels (areas) of support and resistance — levels that serve as targets when opening longs or shorts or as sources of signals.

Red lines — channels or trendlines that display the current trend and indicate the preferred trading direction.

MACD indicator (14,22,3) — histogram and signal line — an auxiliary indicator that can also be used as a source of signals.

Important speeches and reports (listed in the news calendar) can strongly affect a currency pair's movement. Therefore, when they are released, one should trade as cautiously as possible or step aside to avoid a sudden price reversal against the prior direction.

Beginner forex traders should remember that not every trade can be profitable. Developing a clear strategy and money-management rules is the key to long-term success in trading.