Analysis of Trades and Trading Tips for the British Pound
The test of the price level at 1.2522 in the afternoon coincided with the MACD indicator having moved significantly below the zero mark, which limited the pair's downward potential. For this reason, I chose not to sell the pound and ultimately missed out on a strong downward movement.
The increase in activity within the U.S. services sector, which constitutes a significant portion of the economy, confirmed the resilience of consumer demand and business activity. This strengthened the dollar and caused the pound to fall. It also reinforced expectations that the Federal Reserve might maintain a tighter monetary policy for a longer period to address inflation risks. The pound's decline was also tied to concerns over slowing economic growth in the UK, where high interest rates continue to pressure consumers and businesses.
Today, there is no macroeconomic data from the UK, which may result in continued pressure on the pound. This is especially true given the resilience of the U.S. economy, which plays a significant role in shaping market sentiment, supporting the dollar, and limiting the recovery potential of other currencies.
I will primarily focus on implementing Scenarios #1 and #2.
Buy Signal
Scenario #1: Plan to buy the pound today near 1.2500 (green line on the chart) with a target of 1.2539 (thicker green line on the chart). Around 1.2539, I plan to exit purchases and open sales in the opposite direction, aiming for a 30–35-pip movement in the opposite direction from the level. Counting on pound growth today is only reasonable as part of a correction following yesterday's sell-off. Important: Before buying, ensure that 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 1.2476 price level while the MACD indicator is in the oversold area. This will limit the pair's downward potential and lead to an upward market reversal. Growth to the opposite levels of 1.2500 and 1.2539 can be expected.
Sell Signal
Scenario #1: Plan to sell the pound today after the 1.2476 level is updated (red line on the chart), which will lead to a quick decline in the pair. The key target for sellers will be 1.2438, where I plan to exit sales and immediately open purchases in the opposite direction, aiming for a 20–25-pip movement in the opposite direction from the level. Selling the pound at higher levels is preferable to continue the developing bearish trend. Important: Before selling, ensure that 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 1.2500 price level while the MACD indicator is in the overbought area. This will limit the pair's upward potential and lead to a market reversal downward. A decline to the opposite levels of 1.2476 and 1.2438 can be expected.
Chart Notes
- Thin green line: Entry price for buying the trading instrument.
- Thick green line: A suggested target for Take Profit or manually locking in profits, as further growth above this level is unlikely.
- Thin red line: Entry price for selling the trading instrument.
- Thick red line: A suggested target for Take Profit or manually locking in profits, as further decline below this level is unlikely.
- MACD Indicator: Critical for identifying overbought and oversold zones to guide market entry decisions.
Important Note for Beginner Traders
- Always approach market entry decisions cautiously.
- Avoid trading during major news releases to sidestep volatile price swings.
- If trading during news releases, always set stop-loss orders to minimize losses.
- Trading without stop-loss orders or money management practices can quickly deplete your deposit, especially when using large volumes.
- A clear trading plan, like the one outlined above, is essential for successful trading. Spontaneous trading decisions based on current market conditions are inherently disadvantageous for intraday traders.
