On Wednesday, GBP/USD showed a movement similar to one of EUR/USD. The price fell in the first half of the day and rose in the second half. The UK saw the release of inflation data, and Fed Chair Powell testified in Congress. Thus, UK inflation increased to 9.1% in May. Although figures came in line with the forecast, a brief sell-off of GBP began. As we know the higher the inflation, the greater the possibility of further monetary tightening by the Bank of England. In other words, the pound should have gone up in the first half of the day and fallen in the second half. Meanwhile, Chair Powell confirmed the Fed's intention to keep fighting record inflation. So, it is possible to say that the pound had an opposite reaction to the data and the chairman's speech. The currency is in an uptrend and may retrace further up for a while. As for its prospects, they remain vague.
In the M5 time frame, there were both true and false signals made. The pair bounced from 1.2216 producing a false buy signal. It then broke through the mark of 1.2216, creating a true sell signal, fell to 1.2164, and bounced. At the moment of a bounce, it was time to close short positions and open long ones. The pair then broke through 1.2216, rose to 1.2260, and bounced. Thus, it was time to close longs and open shorts. However, that signal turned out to be false, so it was impossible to set a stop-loss order. As a result, it was an unprofitable trade. When the price settled above 1.2260, a buy signal was made. There was no point in going long there because the price was far too high at the moment a signal was created. The quote then bounced from 1.2260, making the last buy signal, which turned out to be profitable. Overall, profit totaled 82 pips.
Trading plan for Thursday:
In the M30 time frame, the pair is in an uptrend but the trend line is no longer relevant. On Wednesday, the pound reacted illogically to important events and reports. Therefore, it is unlikely to extend the uptrend. In the M5 time frame, levels 1.2164, 1.2216, 1.2260, 1.2329-1.2337, 1.2371, and 1.2471-1.2477 stand as targets on Thursday. A stop-loss order should be set at the breakeven point as soon as the price passes 20 pips in the right direction. On Thursday, the UK and the US will see the release of business activity data in the services and manufacturing sectors. The market might react to the results should one or several indicators differ considerably from economists' forecasts. Fed Chair Powell's testimony in Congress will continue on Thursday.
