Trade review for Wednesday:

1H chart of the GBP/USD pair

The GBP/USD pair again moved higher on Wednesday, but it proved too weak given the macroeconomic backdrop. In fact, only one report during the day deserved attention — UK inflation. However, this report outweighs all other releases this week. UK inflation rose more than expected — to 3.5%. Core inflation also showed stronger acceleration. Thus, the Bank of England will likely begin a tightening cycle at its next meeting in early November. In our view, the market has not fully priced in this factor, so the British pound may continue to rise. However, for example, yesterday's sterling strengthening was too weak given the report's importance. The euro, meanwhile, generally does not react to the European Central Bank's hawkish moves. Key support for the pound remains in two sideways channels on the daily and weekly timeframes, from whose lower boundaries price has bounced, suggesting a move toward the upper lines. Thus, on technical grounds, the pound can rise to 1.3650 or higher.

5M chart of the GBP/USD pair

On the 5-minute TF, four trade signals formed on Wednesday. Unfortunately, the first sell signal proved false, but the next three duplicated each other and aligned with the macroeconomic backdrop. However, the pound found no reason to keep rising, so long positions also failed to bring novice traders profits.

How to trade on Thursday:

On the hourly TF, GBP/USD has every chance to complete the downward trend that lasted a month. The British pound has generally shown, and continues to show, greater resilience against the dollar in recent weeks, so it now has a better chance of an upward trend. The technical picture across most charts supports sterling's rise. The fundamental and macroeconomic backdrop, along with the dollar's overbought condition, also supports GBP/USD's rise.

On Thursday, novice traders can open new short positions, targeting 1.3319–1.3331 if price holds below the 1.3380–1.3386 area. Consider long positions with a target of 1.3456–1.3476 if price bounces from the 1.3380–1.3386 area for the fourth time in two days.

On the 5-minute TF you can now 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 Thursday, the UK economic calendar is empty, and the U.S. will release a largely unimportant report on initial jobless claims. Thus, the pair's volatility may again be low 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.