The GBP/USD pair showed extra volatility on Thursday. The pound fell by 300 points. This is a lot, but yesterday we warned that two meetings of central banks could not be left without the attention of traders. Judging by the euro/dollar pair, the market was buying up the US currency during the European trading session. Consequently, the same thing happened in the pound/dollar pair. And then the results of the Bank of England meeting were announced, after which a new round of a powerful fall began. Despite the fact that the British central bank also raised its key rate (which should have provoked the growth of the British pound), the market interpreted the results of the meeting in its own way. It did not even take into account the fact that several members of the Monetary Committee voted for a rate hike not by 0.25%, but by 0.5%, which should again support the pound. However, the British currency was falling all day, and it turns out that the reaction of the market was absolutely illogical. However, this happens. Therefore, we do not recommend trading during the announcement of the results of the central bank meeting or, if you do this, then as carefully as possible. The pound has renewed its 2-year lows today and generally retains a high probability of further decline. The pound/dollar pair failed to correct normally after a strong fall over the past two weeks.
Several trading signals were formed on the 5-minute timeframe today. However, the first one should definitely be ignored. It was formed when the UK just announced the results of the central bank meeting, so at that time it was definitely not necessary to open deals. The next sell signal was formed when the pair surpassed the level of 1.2409, and therefore another - when the pair bounced from below the level of 1.2409. These signals were quite accurate and strong, but at the time of their formation, the price had already gone down about 240 points from the high of the day. The probability of further decline was low (although in the end it continued). In general, we would not advise working out these signals either. Yes, the volatility was 300 points today and it was very tempting to open a trade and try to capture some of that move. But we believe that for beginner traders, safety and caution should come first.
How to trade on Friday:
The downward trend still persists on the 30-minute timeframe. The pound has recently fallen in price by 700 points, and all its attempts to form a tangible correction ended in nothing. Thus, at this time there are high chances for a continuation of the downward movement, but at this time there is neither a trend line nor a descending channel. Therefore, you can trade only by levels, and it is more difficult to navigate the current trend. On the 5-minute TF tomorrow it is recommended to trade at the levels of 1.2250, 1.2409, 1.2477, 1.2502, 1.2596-1.2601. When the price passes after opening a deal in the right direction for 20 points, Stop Loss should be set to breakeven. The UK is set to publish an index of business activity in the construction sector. Most likely, the market will not pay any attention to this report. In America we have the most important reports on unemployment, wages and the labor market. Novice traders should pay close attention to NonFarm Payrolls. Very volatile movements are possible during the day.
