Review of Tuesday's trades:

1H chart of the GBP/USD pair

The GBP/USD pair traded higher on Tuesday despite there being absolutely no local reasons for it. Only an existing-home sales report was published in the US during the day, and that arrived in the afternoon. The pound began rising overnight and continued north throughout the day. Thus, again we can say the macroeconomic backdrop did not affect the pair's move. The pound has traded in a clearly visible sideways channel for two and a half weeks, so random movements within that channel raise no questions. Overall, the downtrend persists, and the pound cannot show any meaningful rally, just like the euro. The market is paused before the next powerful move. Which direction will it be? We wouldn't be surprised if the dollar resumes rising, even though there's no real reason for it.

5M chart of the GBP/USD pair

On the 5-minute timeframe on Tuesday, no trading signals were formed. Price moved upward during the day but only reached the 1.3259–1.3267 area by the end of the session. Therefore, expect signals to form today.

How to trade on Wednesday:

On the hourly timeframe, GBP/USD continues a downward trend that has become a full, powerful trend. The fundamental backdrop for the dollar improved after the Federal Reserve signaled readiness to begin monetary tightening. However, almost a month has passed since then, and the market still keeps buying the dollar. Therefore, we strongly doubt that Fed policy alone is driving the dollar's strength. We view the current move as illogical, driven by inertia, and speculative.

On Wednesday, novice traders may consider short positions targeting 1.3175–1.3180 if price rebounds from the 1.3259–1.3267 area. Open long positions targeting 1.3319–1.3331 if price closes above the 1.3259–1.3267 area.

On the 5-minute timeframe one can trade the levels 1.3043, 1.3096–1.3107, 1.3175–1.3180, 1.3259–1.3267, 1.3319–1.3331, 1.3380–1.3386, 1.3456–1.3476, 1.3587–1.3598, 1.3631–1.3641. On Wednesday, no major events or releases are scheduled in the UK, while the US will publish the inflation report, which is highly important. An acceleration in inflation would raise hawkish market expectations and could lead to another leg up for the dollar.

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.