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05.12.202408:20 Forex Analysis & Reviews: How to Trade the GBP/USD Pair on December 5? Simple Tips and Trade Analysis for Beginners

Analysis of Wednesday's Trades

1H Chart of GBP/USD

Exchange Rates 05.12.2024 analysis

On Wednesday, the GBP/USD pair attempted to extend its upward correction again. As we can see, the upward movement remains weak and slow, which we warned about a couple of weeks ago. This is because corrections typically take much longer than impulsive movements. Currently, the market sees no reason to buy the British pound. We believe that the British currency will decline in the medium term. However, the correction may take a considerable amount of time.

Yesterday, the market received no significant information from Jerome Powell or Andrew Bailey. Bailey stated that the Bank of England's rate could be cut four times next year, but this information did not affect market sentiment. Whether four rate cuts are considered a lot or a little remains unclear. There were no significant reports in the UK, while the ISM Services PMI in the U.S. was weaker than expected, causing a slight decline in the U.S. dollar during the second half of the day.

5M Chart of GBP/USD

Exchange Rates 05.12.2024 analysis

On the 5-minute timeframe, Wednesday's movements were highly erratic. During the European trading session, the pound unexpectedly plummeted downward, only to sharply return to its original position. This coincided with Bailey's speech. Such a reaction cannot be considered rational. The price hovered around the 1.2680-1.2685 zone throughout the day, repeatedly bouncing off and breaking through it. Overall, it was a very challenging day for trading.

Trading Strategy for Thursday:

On the hourly timeframe, the GBP/USD pair continues to correct after a two-month decline. We fully support the pound's decline in the medium term, as we believe it is the only logical scenario. The British pound is still in a corrective phase, which may take longer. However, it's important to remember that the pound's current growth is purely technical.

On Thursday, novice traders may anticipate a decline in the British pound, but movements remain highly erratic, and any rise is merely a correction.

On the 5-minute timeframe, the following levels can be used for trading: 1.2387, 1.2445, 1.2502-1.2508, 1.2547, 1.2633, 1.2680-1.2685, 1.2754, 1.2791-1.2798, 1.2848-1.2860, 1.2913, 1.2980-1.2993. On Thursday, no significant events are scheduled in the UK, and only a minor jobless claims report will be released in the U.S. Volatility might again be low, with movements expected to remain highly erratic.

Core Trading System Rules:

  1. Signal Strength: The strength of a signal is measured by the time it takes to form (a rebound or level breakthrough). The shorter the time, the stronger the signal.
  2. False Signals: If two or more trades near a level result in false signals, all subsequent signals from that level should be ignored.
  3. Flat Markets: Pairs may generate numerous false signals or none during a flat market. 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. Close all trades manually afterward.
  5. MACD Signals: Trade MACD signals on the hourly timeframe only when there is good volatility and a trend confirmed by trendlines or channels.
  6. Close Levels: If two levels are close (5–20 pips apart), treat them as a support or resistance area.
  7. Stop Loss: Place a Stop Loss at breakeven after the price moves 20 pips in the intended direction.

Key Chart Elements:

Support and Resistance Levels: Target levels for opening or closing positions. Take Profit orders can also be set here.

Red Lines: Channels or trendlines that show the current trend and the preferred trading direction.

MACD Indicator (14,22,3): A histogram and signal line that serve as supplementary trading signals.

Important Events and Reports: Found in the economic calendar, these can strongly influence price movements. During their release, trade cautiously or exit the market to avoid sharp reversals against the preceding trend.

Forex beginners should remember that not every trade will be profitable. Developing a clear strategy and practicing proper money management are critical for long-term success in trading.

*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.

Paolo Greco,
Analytical expert of InstaSpot
© 2007-2024
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