Analysis of Trades and Trading Tips for the British Pound
The first test of the 1.2942 price level occurred when the MACD indicator was significantly above the zero mark, which limited the pair's upward potential. For this reason, I decided not to buy the pound. The second test of 1.2942 shortly afterward coincided with the MACD being in the overbought zone, allowing for Scenario #2 to materialize, which resulted in a 20-pip drop in the pound. By the middle of the U.S. session, another test of 1.2942 aligned with the MACD beginning to rise from the zero mark, confirming a proper entry point for buying the pound and leading to a 20-pip gain.
The strengthening of the British pound was driven by several factors putting pressure on the U.S. dollar. These included positive news regarding Ukraine and the lack of negative economic indicators from the UK. Expectations of an upcoming interest rate cut in the U.S. also play a key role in weakening the dollar. A more dovish Federal Reserve reduces the dollar's attractiveness to investors seeking higher yields. Meanwhile, the absence of negative data from the UK has supported positive sentiment about the resilience of the British economy.
Since there are no economic releases from the UK today, the pound may have a chance to continue its bullish momentum. The main driver will likely be the overall weakness of the dollar, which is being observed alongside declining U.S. bond yields. Investors seem to be reassessing the Fed's monetary policy outlook, anticipating a more accommodative approach. However, technically, the GBP/USD pair has approached a key resistance level at 1.2960, and only a breakout above this level will pave the way for further growth.
For intraday strategy, I will primarily rely on Scenarios #1 and #2.
Buy Signal
Scenario #1: I plan to buy the pound today if the price reaches 1.2935 (green line on the chart), aiming for a rise to 1.2962 (thicker green line on the chart). At 1.2962, I plan to exit long positions and open short positions in the opposite direction, expecting a 30-35 pip downward movement from this level. The pound is likely to continue its upward trend. Important: Before buying, ensure that the MACD indicator is above the zero mark and just beginning to rise.
Scenario #2: I will also consider buying the pound today if there are two consecutive tests of the 1.2917 price level while the MACD indicator is in the oversold zone. This will limit the pair's downside potential and lead to a market reversal to the upside, with expected growth toward the opposite levels of 1.2935 and 1.2962.
Sell Signal
Scenario #1: I plan to sell the pound today after it breaks below 1.2917 (red line on the chart), which could trigger a rapid decline in the pair. The key target for sellers will be 1.2885, where I intend to exit short positions and immediately open long positions in the opposite direction, expecting a 20-25 pip bounce from this level. Selling the pound is best done at the highest possible price. Important: Before selling, ensure that the MACD indicator is below the zero mark and beginning to decline.
Scenario #2: I will also consider selling the pound today if there are two consecutive tests of the 1.2935 price level while the MACD indicator is in the overbought zone. This will limit the pair's upside potential and lead to a downward market reversal, with an expected decline toward the opposite levels of 1.2917 and 1.2885.
What's on the Chart:
- The thin green line represents the entry price where the trading instrument can be bought.
- The thick green line indicates the expected price level where a Take Profit order can be placed, or profits can be manually secured, as further price growth above this level is unlikely.
- The thin red line represents the entry price where the trading instrument can be sold.
- The thick red line indicates the expected price level where a Take Profit order can be placed, or profits can be manually secured, as further price decline below this level is unlikely.
- The MACD indicator should be used to assess overbought and oversold zones when entering the market.
Important Notes:
- Beginner Forex traders should exercise extreme caution when making market entry decisions. It is advisable to stay out of the market before the release of important fundamental reports to avoid exposure to sharp price fluctuations. If you choose to trade during news releases, always use stop-loss orders to minimize potential losses. Trading without stop-loss orders can quickly wipe out your entire deposit, especially if you neglect money management principles and trade with high volumes.
- Remember, successful trading requires a well-defined trading plan, similar to the one outlined above. Making impulsive trading decisions based on the current market situation is a losing strategy for intraday traders.
