Monday trade review:

1H chart of the GBP/USD pair

The GBP/USD pair also resumed a downward move on Monday, forming a new descending trend line. There is no need to guess why the dollar is rising now. Although confidence in Federal Reserve tightening remains lacking and the market has already largely priced in the most "hawkish" outcome, the dollar continues to strengthen, and the Bank of England's monetary policy is of little concern to traders. Last week the market ignored the European Central Bank's rate increase for the second time, and this week it may similarly ignore the BoE's results. Note that the BoE is unlikely to raise the key rate at this meeting, but its tone could become more hawkish — which is unsurprising given the likely acceleration of inflation globally this autumn and winter. But as already noted, the market now focuses almost exclusively on the Federal Reserve and its need to be "hawkish" for an extended period.

5M chart of the GBP/USD pair

On the 5-minute TF on Monday, two buy trading signals were formed. Price bounced twice from the 1.3456–1.3476 area, allowing novice traders to open long positions. The signals duplicated each other, so only one trade could realistically be opened. By the end of the day, the price rose about 15–20 pips, enough at most to move the stop-loss to break-even.

How to trade on Tuesday:

On the hourly timeframe, the GBP/USD pair continues a downward corrective trend that may end soon. In our view, sterling should continue to rise in the medium term under any scenario, but it is currently undergoing a correction. On the weekly TF, the move from the lower boundary of the sideways channel toward the upper boundary continues and may not be complete. Thus, we expect the northbound impulse to resume.

On Tuesday, novice traders may consider short positions targeting 1.3380–1.3386 if price consolidates below 1.3456–1.3476. Open long positions targeting 1.3587–1.3598 if price bounces off the 1.3456–1.3476 area.

On the 5-minute TF, you can trade the levels 1.3259–1.3267, 1.3319–1.3331, 1.3380–1.3386, 1.3456–1.3476, 1.3587–1.3598, 1.3631–1.3641, 1.3695, 1.3741. On Tuesday, the UK will publish unemployment and wages reports, and the US calendar shows only the minor weekly ADP report. In our view, the Fed meeting will remain the market's main focus today.

Key Rules of the Trading System:

1. The strength of a signal is determined by the time it takes to form the signal (rebound or breakout). The less time taken, the stronger the signal.
2. If two or more trades were opened at a certain level based on false signals, all subsequent signals from that level should be ignored.
3. In a range (flat), any pair can generate many false signals or may not produce any at all. Technical levels may be disregarded.
4. On the hourly timeframe, trading signals from the MACD indicator should be acted upon only when volatility is high, and a trend line or trend channel confirms the trend.
5. If two levels are too close together (within 5-20 pips), treat them as a support or resistance area.
6. After moving 15 pips in the right direction, a stop-loss should be set to break even.

What to Look for on the Charts:

Price levels (areas) of support and resistance serve as targets for opening buy or sell trades or as sources of signals.

Red lines indicate channels or trend lines that show the current trend and the preferred trading direction.

The MACD indicator (14,22,3) — the histogram and signal line — is an auxiliary indicator that can also provide signals.

Important speeches and reports (listed in the news calendar) can significantly influence currency pair movements. Therefore, during their release, traders should approach trading with utmost caution, or exit the market to avoid sudden reversals against the preceding move.

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