Trade Review of Wednesday:

1H Chart of the GBP/USD Pair

The GBP/USD pair also declined on Thursday, which broadly fits the pound's overall picture and its technical setup on the hourly timeframe. We don't see strong reasons for such a powerful rise in the US currency, but last week the ascending trendline broke, so the drop is plausible from a technical standpoint. However, do you not think the dollar didn't deserve a 200-pip rise based on a single inflation report that beat forecasts by 0.1%? Recall that the Federal Reserve's December decision is effectively already priced in. So what is the market working through now? First, the dollar rises on hawkish expectations, then it rises on their realization — but nothing has been realized yet, since the Fed will raise the policy rate for the second time only a month from now. Thus, we believe the market is currently experiencing another anomalous and illogical US-dollar rally. We do not see sufficient reasons for such a strong rise. What is happening now in the market can be called a crash.

5M Chart of the GBP/USD Pair

On the 5-minute timeframe, two signals formed on Wednesday. During the European session, the price settled below the 1.3319–1.3331 zone, allowing traders to open short positions. A few hours later, the price bounced off 1.3259–1.3267, enabling traders to close shorts and open long positions. The longs did not bring profits because the price did not move further for the rest of the day. But the shorts could have earned about 30 pips.

How to Trade on Thursday:

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

On Thursday, novice traders may consider shorts targeting 1.3175–1.3180 if price consolidates below the 1.3259–1.3267 area. Open longs targeting 1.3319–1.3331 if price closes above the 1.3259–1.3267 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. On Thursday, the UK will publish Q3 GDP and industrial production—fairly important releases that may provoke a market reaction. In the US today, only secondary reports are expected.

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.