Trade Analysis & Trading Tips for the British Pound
The test of 1.2355 occurred when the MACD indicator was just starting to move downward from the zero level, confirming a valid short entry. As a result, the pair declined by approximately 25 points before selling pressure eased.
Pound sellers attempted a deeper decline, but their efforts were limited due to supportive comments from Bank of England (BoE) officials. However, this does not mean that GBP is fully protected from further weakening.
Inflation in the UK remains high, forcing the BoE to make difficult policy decisions. Uncertainty over economic growth prospects continues. Excessively high interest rates could worsen growth forecasts.
If FOMC members express disagreement, Powell's testimony may have less impact on markets. If Powell's stance is more dovish than expected, the pound could see temporary support. However, long-term GBP outlook remains uncertain due to domestic UK economic issues. Traders should remain cautious, considering both the Fed's policy outlook and broader global trends.
For intraday strategy, I will focus primarily on Scenario #1 and Scenario #2.
Buy Signal
Scenario #1: Buying GBP/USD is possible at 1.2373 (green line on the chart) with an upward target of 1.2413 (thicker green line on the chart). At 1.2413, I will exit the trade and consider selling GBP/USD in the opposite direction, expecting a 30-35 point retracement. A pound rally today is only possible if the Fed adopts a dovish stance.
Important! Before buying, ensure that the MACD indicator is above the zero level and just starting to rise.
Scenario #2: Another buy opportunity arises if the price tests 1.2355 twice while the MACD indicator is in the oversold zone. This scenario limits downward potential and triggers a bullish reversal. Target levels: 1.2373 and 1.2413.
Sell Signal
Scenario #1: Selling GBP/USD is planned after breaking below 1.2355 (red line on the chart) with a downward target of 1.2309. At 1.2309, I will exit the trade and enter a buy position, aiming for a 20-25 point retracement. A more aggressive Fed stance could accelerate selling pressure.
Important! Before selling, ensure that the MACD indicator is below the zero level and just starting to decline.
Scenario #2: Another sell opportunity is possible if the price tests 1.2373 twice while the MACD indicator is in the overbought zone. This scenario limits upward potential and triggers a bearish reversal. Target levels: 1.2355 and 1.2309.
Chart Breakdown
- Thin Green Line – Entry price for buying the asset.
- Thick Green Line – Suggested Take Profit level or an area where traders can secure profits, as further upside is unlikely.
- Thin Red Line – Entry price for selling the asset.
- Thick Red Line – Suggested Take Profit level or an area where traders can secure profits, as further downside is unlikely.
- MACD Indicator – When entering trades, consider overbought and oversold zones.
Important Notes for Beginner Forex Traders
- Exercise caution when making entry decisions. It is best to stay out of the market before the release of key fundamental reports to avoid sudden price swings.
- Always use stop-loss orders when trading during news releases to minimize losses. Without stop-loss protection, you could quickly lose your entire deposit, especially if you trade large volumes without risk management.
- A structured trading plan is essential for success. Following a predefined strategy, like the one outlined above, helps maintain discipline and avoid emotional trading.
- Avoid making impulsive trading decisions based on short-term price movements, as this is a losing strategy for intraday traders.
