Yesterday, the GBP/USD pair continued not just a fall, but a landslide decline. Volatility of the day was almost 200 points, and the pound started to fall at night. Thus, the pound fell just like that, by inertia, and due to the disappointing report on the British GDP, which showed a contraction of 0.3% in April, altogether. It should be noted right away that the report on GDP could really strengthen the bearish mood of traders. However, the pound would most likely have fallen even without this report, as the euro did. After Friday's inflation report, which significantly increased the likelihood of a Federal Reserve rate hike not by 0.5% in June, but immediately by 0.75%, the dollar is growing by leaps and bounds. This is precisely the chance for the euro and the pound. If traders have already won back a future 0.75% rate hike, then if the Fed announces a 0.5% hike on Thursday, the dollar could fall very badly. It is also possible that the market has simply worked out any increase, so it will simply not buy the dollar. In any case, we are in for a very active week, as it will also include the Bank of England meeting.
A lot of trading signals were formed on the 5-minute timeframe. First, the price rebounded from the level of 1.2296, forming a sell signal. Then it overcame the 1.2260 level, after which the price rebounded from it from the bottom not very accurately – two more sell signals. Only one trade should have been opened on these signals, near the level of 1.2296. A short position should have been closed near the level of 1.2216, since the price initially rebounded from it. Unfortunately, this rebound spoiled the whole picture. It was possible to make a profit on the first short position (50 points), but this rebound was also a signal to buy, so it was necessary to open a long position, which turned out to be unprofitable, because the price settled below the level of 1.2216 almost immediately. But there is good news, consolidating below the level of 1.2261 was a signal to sell, which means it was necessary to sell again. This trade closed near the 1.2164 level, from which the price also bounced. After a buy signal, it was able to go up 30 points, so novice traders had the opportunity to set Stop Loss to breakeven. The most recent sell signal should not have been worked out, since it was formed too late. As a result, two transactions are profitable, one is unprofitable.
How to trade on Tuesday:
The pound's sharp decline continues on the 30-minute timeframe. And it is very difficult to guess what will happen next, since the meetings of the Bank of England and the Fed will be held on Wednesday and Thursday, and these are the most important events in the foreign exchange market. The volatility of the pair is already the highest, and it could be even higher on Wednesday and Thursday. The most important thing to remember is to be cautious these days. On the 5-minute TF, it is recommended to trade at the levels 1.2071, 1.2164, 1.2216, 1.2260, 1.2296, 1.2329-1.2337. When the price passes after opening a deal in the right direction for 20 points, Stop Loss should be set to breakeven. No major events are planned for tomorrow in the UK and America. Novice traders had nothing to react to during the day. We expected a correction on Monday, but did not wait for it. So now we will wait for it on Tuesday. However, a fall in the pound remains the most likely option.
