On Tuesday, February 1st, GBP/USD was trading mixed. The trend discrepancies could be seen in both 5M and 30M time frames. Remarkably, the pair has managed to approach the downward trend line. At first, the price rebounded from it, but on the second try, the line was broken. It was a rather unclear and contradictory move as the pair has advanced 5 pips and held steady thereafter, being stuck at the trend line for 5-6 hours. So, we cannot say for sure whether it has been a break or a rebound. Probably, both these variants are wrong. It is unclear if the British currency will extend its gains, especially ahead of the BOE policy meeting. It will be held tomorrow and the results will be revealed on Thursday afternoon. This factor should be kept in mind. As for today's developments, the only macroeconomic report worth investors' attention was the ISM manufacturing PMI. However, it attracted feeble interest, so the pound/dollar movements were shaped by technical factors.
The 5M time frame also provided a confusing picture. Yesterday, I thought the levels of 1.3431 and 1.3439 to be no longer valid as the price passed through them in both directions. However, it has turned out there are simply no other levels in this area. So we have a contradictory situation: either to keep these levels for the next day or simply refrain from opening any positions at the moment. If we choose to stick to these levels, then we should pay attention to an off-target buy signal formed in the early European session. There was a 3-pips discrepancy, and before that, the price rebounded from this area twice. So, it was still safe to open buy positions at the opening of the European trades. To mitigate risks, long trades were hedged as the downward scenario remained valid. Afterward, the pair rose to 1.3488, broke it, and started fluctuating near the trend line on the 30M time frame. So, it was reasonable to close long positions and wait for the price clearly breaking the trend line. Surprisingly, the cable broke below 1.3488 in the early American session, thus forming a false sell signal. Beginning traders might have suffered a loss of 15 pips following such a signal. Overall, the situation was mixed today, causing different trading results.
Trading plan for Wednesday, February 2nd
In the 30M time frame, the downward trend seems to remain valid. However, the pair needs to end the correction and stay below the trend line to keep falling. On Wednesday, volatility is likely to be moderate, whereas Thursday and Friday may produce choppy trading. So, the situation on Wednesday may be confusing again with no clear signals. The target levels in the 5M time frame may be found at 1.3431-1.3439, 1.3488, 1.3521-1.3531, 1.3572, and 1.3598-1.3603. The British economic calendar lacks any important releases while the United States will unveil the ADP report that has been of minor interest lately. So, the macroeconomic and fundamental backgrounds will be weak.
