Trading plan for GBP/USD on January 26. Simple tips for beginners

GBP/USD moved lower on Thursday. Volatility was quite weak, only around 60 pips. Therefore, this means that the British pound had a weak reaction to the European Central Bank meeting and the strong US data. The decline did not make any sense. The price continues to stay within the sideways channel of 1.2611-1.2787, where it has been for over a month. Therefore, the technical picture remains unchanged.

The latest US reports turned out to be strong. Despite the fact that the report on durable goods orders was weaker than expected, it was more than offset by the fourth-quarter GDP report, which showed growth of 3.3% against forecasts of +2.0%. As we can see, the American economy continues to perform much better than traders and experts expect. However, this does not help the US dollar. It still cannot rise against the British pound.

The movements on the 5-minute timeframe were not the best, or the strongest. The trading signals also left much to be desired. However, this is not surprising if the price spent almost the entire European session and half of the US session around the level of 1.2725. In all this confusion, only one buy signal and one sell signal could be discerned. The buy signal turned out to be a false signal, the price failed to rise and gained only 20 pips. The sell signal was slightly better, but due to weak volatility, it only reached the nearest level of 1.2688. Beginners made a profit from the second trade, but the first trade resulted in a loss for them.

On the hourly chart, GBP/USD is still trading within the sideways channel of 1.2611-1.2787. The price bounced off the level of 1.2611 five times, and after the last bounce, a new uptrend has started within the flat. The pair has not yet reached the upper boundary of the channel, and now it is in the middle of the sideways channel. Therefore, the pair could move in any direction on Friday.

There is a good chance that the British pound will stay within the sideways channel. There are no good signals for buying or selling at the moment.

The key levels on the 5M chart are 1.2270, 1.2310, 1.2372-1.2387, 1.2457, 1.2502, 1.2544, 1.2605-1.2611, 1.2688, 1.2725, 1.2787-1.2791, 1.2848-1.2860, 1.2913, 1.2981-1.2993. On Friday, there are no important events lined up in the UK. From the US docket, secondary reports on producer prices and personal income and spending of the US population will be released. It is unlikely for these reports to pull GBP/USD out of the sideways channel, as it has been trading in it for more than a month.

1) Signal strength is determined by the time taken for its formation (either a bounce or level breach). A shorter formation time indicates a stronger signal.

2) If two or more trades around a certain level are initiated based on false signals, subsequent signals from that level should be disregarded.

3) In a flat market, any currency pair can produce multiple false signals or none at all. In any case, the flat trend is not the best condition for trading.

4) Trading activities are confined between the onset of the European session and mid-way through the U.S. session, after which all open trades should be manually closed.

5) On the 30-minute timeframe, trades based on MACD signals are only advisable amidst substantial volatility and an established trend, confirmed either by a trendline or trend channel.

6) If two levels lie closely together (ranging from 5 to 15 pips apart), they should be considered as a support or resistance zone.

Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them.

Red lines represent channels or trend lines, depicting the current market trend and indicating the preferable trading direction.

The MACD(14,22,3) indicator, encompassing both the histogram and signal line, acts as an auxiliary tool and can also be used as a signal source.

Significant speeches and reports (always noted in the news calendar) can profoundly influence the price dynamics. Hence, trading during their release calls for heightened caution. It may be reasonable to exit the market to prevent abrupt price reversals against the prevailing trend.

Beginners should always remember that not every trade will yield profit. Establishing a clear strategy coupled with sound money management is the cornerstone of sustained trading success.