Analysis of Friday's Trades

1H Chart of GBP/USD

The GBP/USD pair experienced a recovery on Friday after a sharp decline on Thursday. This increase in the value of the British currency was primarily technical, as these technical factors outweighed the macroeconomic backdrop for market participants. For the first time in two weeks, an important report was published on Friday, which again prompted the market to consider buying the US dollar. The ISM Manufacturing PMI in the US came in better than expected. Typically, a better-than-forecast reading serves as a reason to purchase the dollar. However, there was no significant movement towards buying the dollar, and the market reaction was muted. This does not necessarily indicate that the decline of the pound has come to an end. As the new week begins, the pound may continue to experience an upward correction, but all signs suggest that the sterling is likely to persist in its prolonged decline. We have cautioned about this possibility multiple times.

5M Chart of GBP/USD

In the 5-minute time frame, four buy signals generated near the 1.2387 level on Friday. The price rebounded from this level four times, with each signal effectively mirroring the previous one. Consequently, novice traders could have opened only one buy trade, which ultimately turned out to be profitable. The total upward movement from the 1.2387 level was 30 pips.

Trading Strategy for Monday:

On the hourly time frame, the GBP/USD pair has recently exited the holiday flat phase and resumed its primary trend. In the medium term, we fully anticipate a decline in the pound, as we believe this is the only logical outcome. Therefore, further declines should be expected; however, trading decisions should always be based on technical signals. The results of the Bank of England and Federal Reserve meetings reinforce the likelihood of continued downward movement.

On Monday, the GBP/USD pair may continue to correct following Thursday's drop. However, new signals will be necessary to open fresh positions.

On the 5-minute time frame, the following levels can be considered for trading: 1.2387, 1.2445, 1.2502-1.2508, 1.2547, 1.2633, 1.2680-1.2685, 1.2723, 1.2791-1.2798, 1.2848-1.2860, 1.2913, and 1.2980-1.2993.

Additionally, on Monday, both the UK and the US will release their second estimates of services PMI data, which are considered secondary reports. These data releases may provoke minimal market reaction, but nothing more significant is expected.

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.