Trade Analysis and Tips for Trading the British Pound
The test of the 1.2977 price level occurred just as the MACD indicator began moving downward from the zero mark, confirming the ideal entry point for selling the pound. As a result, the pair plunged by 90 pips. Challenges with implementing the new UK budget throughout the week have put pressure on the pound, leading to a substantial sell-off following strong U.S. data yesterday. Today's data releases include the UK Nationwide House Price Index and the PMI for the manufacturing sector. Weak results could trigger another round of pound selling even before the critical U.S. labor market data are released in the second half of the day. I'll rely primarily on implementing scenarios #1 and #2 for the intraday strategy.
Buy Signal
Scenario #1: I plan to buy the pound today if it reaches the entry point around 1.2905 (green line on the chart) with a target of 1.2935 (thicker green line on the chart). At 1.2935, I plan to exit long positions and open short positions in the opposite direction (aiming for a 30-35 pip move back from this level). The pound's rise today is likely only within the framework of a minor upward correction. Important! Before buying, ensure the MACD indicator is above the zero mark and just beginning to rise.
Scenario #2: I also plan to buy the pound today if there are two consecutive tests of the 1.2882 level while the MACD indicator is in the oversold area. This will limit the pair's downward potential and prompt an upward market reversal. An increase to the opposite levels of 1.2905 and 1.2935 can be expected.
Sell Signal
Scenario #1: I plan to sell the pound today after breaking below the 1.2882 level (red line on the chart), which will lead to a rapid decline in the pair. The main target for sellers will be 1.2844, where I plan to exit shorts and open longs immediately in the opposite direction (aiming for a 20-25 pip move back from this level). Selling the pound is only advisable if buyer activity around the daily high is weak. Important! Before selling, ensure the MACD indicator is below the zero mark and beginning to decline.
Scenario #2: I also plan to sell the pound today if there are two consecutive tests of the 1.2905 level while the MACD indicator is in the overbought area. This will limit the pair's upward potential and prompt a market reversal downward. A decline to the opposite levels of 1.2882 and 1.2844 can be expected.
Chart Indicators:
Thin Green Line – Entry price to buy the instrument.
Thick Green Line – Suggested price level for setting Take Profit or manually taking profits, as further growth beyond this level is unlikely.
Thin Red Line – Entry price to sell the instrument.
Thick Red Line – Suggested price level for setting Take Profit or manually taking profits, as further decline beyond this level is unlikely.
MACD Indicator – When entering the market, consider overbought and oversold zones.
Important: Novice traders should exercise caution when entering the market. Before the release of significant fundamental reports, it is best to stay out of the market to avoid sudden price swings. If you choose to trade during news releases, always set stop orders to minimize losses. You may quickly lose your entire deposit without stop orders, especially if trading large volumes without proper money management.
Remember, successful trading requires a clear plan, like the above example. Spontaneous trading decisions based on current market conditions are inherently a losing strategy for an intraday trader.
