22.01.202507:37 Forex Analysis & Reviews: How to Trade the GBP/USD Pair on January 22? Simple Tips and Trade Analysis for Beginners

Analysis of Tuesday's Trades

1H Chart of GBP/USD

On Tuesday, the GBP/USD pair initially traded downward before reversing and moving upward. It is important to note that the British pound was influenced by more factors than the euro. In the morning, the UK released reports on unemployment, jobless claims, and wages. While the unemployment report was disappointing, the other two reports were favorable for the pound. Wages increased more than expected, and the number of jobless claims was lower than forecasted. As a result, the market did not receive a clear signal on how to respond to the pound on Tuesday, but such a signal was not necessarily needed. The pair is currently undergoing a correction following a decline that lasted 3.5 months, and corrections typically do not require fundamental or macroeconomic justification. The trendline indicates that the short-term upward trend remains intact, suggesting that this correction could continue. However, we do not anticipate significant growth for the pound, and it's important for novice traders to understand that the current movement is corrective in nature.

5M Chart of GBP/USD

On the 5-minute timeframe on Tuesday, several trading signals emerged, although they were not very reliable. Overnight, the price bounced back from the 1.2245-1.2255 range, which is a newly identified zone, but most traders likely missed this signal. The price then spent a considerable amount of time creating another buying opportunity in the same area, but this signal turned out to be unusually inaccurate. While those who entered long positions were able to secure some profits, buying was not the most obvious or straightforward choice in this situation.

Trading Strategy for Wednesday:

On the hourly timeframe, the GBP/USD pair is showing a short-term upward trend, which essentially represents a correction. In the medium term, we maintain a bearish outlook on the pound, targeting 1.1800, as we believe this is the most logical scenario. Therefore, we expect further declines, with the trendline serving as a guide to identify the end of the current correction.

On Wednesday, GBP/USD is likely to trade more calmly and could potentially return to the ascending trendline.

On the 5-minute timeframe, you can consider trading at the following levels: 1.2010, 1.2052, 1.2089-1.2107, 1.2164-1.2170, 1.2241-1.2270, 1.2316, 1.2372-1.2387, 1.2445, 1.2502-1.2508, 1.2547, 1.2633, 1.2680-1.2685, 1.2723, and 1.2791-1.2798. There are no scheduled economic events in the UK on Wednesday, and the same goes for the US. We believe the dollar may strengthen today, as the declines on Monday and Tuesday were illogical and unwarranted.

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 speeches and reports, which are consistently featured in the news calendar, can significantly influence the movement of a currency pair. Therefore, during their release, it is advisable to trade with caution or consider exiting the market to avoid potential sharp price reversals against the prior trend.

Beginners in the Forex market should understand that not every transaction will be profitable. Developing a clear trading strategy and practicing effective money management are crucial for achieving long-term success in trading.