Hourly chart of the GBP/USD pair
The GBP/USD pair began to correct on Tuesday, which was signaled by the MACD indicator with a downward reversal. The pair's quotes fell for most of the day, which fully fits into the correctional scenario. The rising trend line kept the upward trend in the pair. Thus, traders had to wait for either the price to settle below the trend line, or a buy signal from the MACD indicator. As a result, only one signal was generated during the day - to buy, following an upward reversal of the MACD indicator. However, when this signal was formed, most of the upward movement of the pair had already passed. The candlestick that preceded the formation of the signal is equal in size to 55 points. Thus, such a strong upward movement almost at the very end of the day could not be interpreted as a strong signal. We've talked about this before in our beginner reviews. You should avoid signals that were formed by such giant candlesticks. But even if newcomers to the foreign exchange market made this mistake and opened long positions, now they are even in a small profit and, at least, have the opportunity to close this transaction at zero. Or they may not close, but wait until the price rises to the target level of 1.3959, placing Stop Loss below the entry level just in case. You can potentially earn up to 40 points on this trade.
No major report released in the UK or the US on Tuesday, nor was there a single interesting event. Therefore, the pair's movements on Tuesday were not dictated by the fundamental background or macroeconomic statistics. Since there was absolutely nothing to pay attention to today. We remind you that the markets continue to ignore most of the news and reports, guided by other factors in their trading decisions. Thus, we advise you to trade with technical analysis first.
The UK will release its inflation report and the US will release its retail sales on Wednesday. Markets may ignore this data again, but it is still not worth leaving it unattended. Inflation in the UK may turn out to be worse than a month earlier, so the pound may resume its fall tomorrow. And at the same time, if the report turns out to be stronger than forecasts, the upward trend may resume.
Possible scenarios on February 17:
1) Long positions remain valid as the upward trend line remains in effect. A buy signal has already formed, however, as we mentioned, it was not strong. Thus, traders have the right to leave buy trades open while aiming for 1.3959 or wait for new buy signals. In the first case, you are advised to set Stop Loss below the entry point, since the deal will have to be left overnight.
2) Short positions are not irrelevant at the moment, as the upward trend continues. However, if the price settles below the trend line, then the downward movement may continue within the framework of at least a correction. Therefore, in this case, you are advised to open short positions while aiming for the support level of 1.3819.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.
The MACD indicator consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.
