pound/dollar pair

Yesterday, the pound/dollar pair formed several entry signals. Let's look at the 5-minute chart and figure out what actually happened. In my morning forecast, I turned your attention to the level of 1.2725 and recommended making decisions with this level in focus. Growth and a false breakout at this mark produced a sell signal. As a result, the pair fell by more than 40 pips. In the afternoon, a false breakout at 1.2725 did not provide a good result.     For long positions on GBP/USD: Yesterday's data on the sharp rise in average earnings in the UK only provided temporary support for the pound, afterwards, the pair was under pressure again. Today's UK inflation report turned out to be worse than economists' forecasts, which, as you can see on the chart, is already limiting the GBP/USD decline prospects as high price pressure, especially in the core index, persists. For this reason, long positions will be interesting today, but it is best to act on the downside all the way from the same support level at 1.2688, which is in line with the bullish moving averages. A false breakout on this mark will confirm the presence of big players in the market, which will produce a good buy signal and will lead to a breakout to the resistance at 1.2722. A breakout and consolidation above this range will give the bulls a boost, preserving the chances of building a correction with the next target at 1.2749 - yesterday's high. A more distant target will be 1.2781 where I will be taking profits.   If GBP/USD falls and there are no bulls at 1.2688, the pound will be under pressure. In this case, only the protection of 1.2658, as well as a false breakout on this mark, will create new entry points into long positions. You could buy GBP/USD at a bounce from 1.2623, keeping in mind an upward intraday correction of 30-35 pips. For short positions on GBP/USD: The pair is trading within the sideways channel, so bears will become more active, especially at its upper boundaries. An unsuccessful consolidation above 1.2722, the new intermediate resistance level, will produce a sell signal with a prospect of falling to 1.2688. A breakout of this level and its upward retest would significantly dent the bulls' positions, offering a chance for a more substantial decline towards the low of 1.2658. A more distant target will be the month's low at 1.2623 - the bulls' last hope. If GBP/USD grows and there is no activity at 1.2722, which can happen given the inflation report, bulls will not regain full control of the pair, but they will get the chance to start an upward correction towards 1.2749. Only a false breakout at this mark would provide an entry point for going short. If there is no downward movement there, I would sell the pound right on a rebound from 1.2781, hoping for an intraday correction of 30-35 pips.     COT report: The Commitments of Traders (COT) report for August 8th recorded a decline in both long and short positions. Traders have been closing their positions ahead of important UK GDP data, realizing that the Bank of England would continue to raise interest rates, no matter the cost. Good data on the British economy allowed the market to maintain balance, preventing a significant sell-off of the British pound last week, which was triggered by another increase in inflation in the US. However, the optimal strategy is to buy the pound on dips, as the difference in the policies of the central banks will affect the prospects of the US dollar, putting pressure on it. The latest COT report indicates that long positions of the non-commercial group of traders have decreased by 8,936 to 93,239, while short positions fell by 6,394 to 36,219. As a result, the spread between long and short positions increased by 185. The weekly closing price dropped to 1.2749 compared to the prior value of 1.2775.  

Analyzing Tuesday's trades: EUR/USD on 30M chart   On Tuesday, EUR/USD was quite chaotic. There was a small upward-sloping line, but even on the 30-minute chart, it's easy to see how often the pair changed direction. In addition to this, the price closed above the descending trendline, and several reports were published in the EU and US, which, although they were not marked as "important," still had some impact on the pair's movement.   Volatility was 56 points, which is very low. As a result, it was a low-volatility day, with chaotic movements, a ton of signals, and mixed economic reports.   The ZEW Economic Sentiment Index for the EU and Germany turned out to be slightly better than expected. The US retail sales report was also better than expected. There was a slight market reaction, but it only added confusion to the intraday movements. We can't even conclude that an upward correction has started - the trend line was too weak.   EUR/USD on 5M chart   Several trading signals were formed on the 5-minute chart. Traders could gain 15 pips on the first buy signal around the 1.0904 level. It should have been closed when the price closed below the 1.0936 level. Based on this sell signal, short positions should have been opened, and subsequently, the 1.0904 level was retested, where shorts should have been closed. A bounce from this level – new longs and another 15 pips of profit. Later on, the pair started to "dance" around the 1.0936 level, forming false signals. They could have resulted in losses, but not all of them needed to be executed. Any two false signals around the same level "blocked" the execution of all subsequent ones. Therefore, the day still ended in profit, albeit a small one.   Trading tips on Wednesday: On the 30M chart, the pair is trading with a downward tendency, and may continue to fall, which, in our opinion, is still the most justified and logical course of events. We don't see any macroeconomic background that would be capable of changing market sentiment this week. The key levels on the 5M chart are 1.0761, 1.0835, 1.0871, 1.0901-1.0904, 1.0936, 1.0971-1.0981, 1.1011, 1.1043, 1.1091, 1.1132-1.1145, 1.1184, 1.1241. A stop loss can be set at a breakeven point as soon as the price moves 15 pips in the right direction. On Wednesday, the EU will publish reports on its Q2 GDP in the second estimate, as well as industrial production. This may be sufficient enough to stir some market reaction or none at all.   Basic trading rules: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal. 2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored. 3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading. 4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually. 5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel. 6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.   How to read charts: Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them. Red lines are channels or trend lines that display the current trend and show which direction is better to trade. MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines. Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement. Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.