Hourly chart of the GBP/USD pair
The GBP/USD pair has been trading between the 1.3885 and 1.4000 levels for most of the week. The price has not been able to surpass the 1.4000 level twice now, and is not yet able to continue the downward trend. In addition, we managed to form two trend lines at once, which, by and large, contradict each other. A longer trendline - a downward trend - indicates that the downward trend will continue, while a shorter one - an upward trend - indicates that a short-term upward trend will form. Thus, in fact, whichever trend line traders manage to overcome in the near future, then the movement will continue in that direction. The price can determine the direction of movement on Thursday, and novice traders can only use one trend line. The pair traded mostly sideways during the day. Traders consider this movement as a "flat". The MACD indicator formed several sell signals at once during the day, but the first of them, which appeared at night, was much higher than the zero level, and each subsequent one was a result of the indicator's discharge. Thus, none of these signals should have been processed. As we have already said, novice traders are advised to work out the strongest signals.
The UK PMI for the services sector was published on Wednesday. Unfortunately for the British pound, after a very optimistic month of January, the value of the indicator decreased in February. Not much, just by 0.2 points, but still it decreased and reached 49.5. Thus, the British currency did not receive support in the morning, and the service sector continues to shrink. Furthermore, Rishi Sunak, UK Treasury Secretary gave a speech, who presented the budget plan for 2021 and assured that business and unemployed Britons will continue to receive financial assistance from the state. Thus, the markets calmed down a bit, but the pound did not receive much support either. Demand for the UK currency did not grow after the disastrous reports of ADP and ISM in America. The first of them witnessed an increase of only 107,000 new workers in the private sector, and the second - indicated a decrease in business activity in the service sector by 3.4 points to 55.3. However, traders ignored all of the day's macroeconomic reports.
There are no major publications scheduled in the UK and the US on Thursday, only minor ones. Novice traders can pay attention to the PMI in the construction sector in Britain and the number of applications for unemployment benefits in the US, but there is practically no chance that the pound/dollar pair will work out these data. Federal Reserve Chairman Jerome Powell's speech in the evening can rattle the pair. However, novice traders can already leave the market before this speech in order to avoid risk.
Possible scenarios on March 4:
1) Long positions are currently relevant, since there is an upward trend line. However, buyers need to wait for a clear buy signal from the MACD indicator, which is still discharging more in the flat. You should not enter the market without such a signal. Targets - 40-50 points from the entry point.
2) Short positions are also relevant now, since the downward trend line is also present. However, the pair was flat today, therefore, firstly, it needs to be completed before opening any positions. Furthermore, you can trade bearish using the MACD signal to sell. You will need to look at the pair's behavior around the upward trend line. In case of a rebound, any shorts will be closed. In case it overcomes it - maintain short positions.
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.
