Analysis of Trades and Tips for Trading the British Pound
The test of the price at 1.3386 coincided with the moment when the MACD indicator was just starting to move down from the zero mark, confirming it as a correct entry point for selling the pound. As a result, the pair dropped by more than 30 pips.
Weak data on business activity indices in the UK's manufacturing and services sectors put significant pressure on the British pound yesterday. The PMI figures, reflecting the state of various sectors of the economy, showed declines, painting a less-than-rosy picture for the British economy. At the same time, the ongoing nervous situation in the Middle East remains a source of uncertainty, causing concern in financial markets. The redeployment of US ground troops to the region heightens fears regarding the possible escalation of the conflict. Geopolitical tensions traditionally trigger a reduction in risk appetite, forcing investors to seek safer havens for their capital. In such conditions, the British pound, a relatively volatile asset, is under double pressure.
Today, data from the United Kingdom takes center stage. The upcoming publication of inflation figures is particularly significant. The consumer price index is one of the key measures of price growth and serves as a benchmark for the Bank of England's monetary policy. In addition to the overall CPI, analysts will also focus on the core index. These figures will provide insight into the current level of inflationary pressure in the British economy. Additionally, a speech by Megan Greene, a member of the Bank of England's Monetary Policy Committee, is scheduled. Her remarks may shed light on the central bank's future intentions, especially amid the sharp rise in energy prices driven by the war in the Middle East.
Regarding the intraday strategy, I will primarily rely on implementing scenarios No. 1 and No. 2.
Buy Scenarios
Scenario 1: I plan to buy the pound today when it reaches an entry point around 1.3390 (green line on the chart), targeting a rise to 1.3425 (thicker green line on the chart). At around 1.3425, I plan to exit the market and open sell positions in the opposite direction (expecting a 30-35-pip move back from the level). Strong pound growth can only be expected after good economic data. 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 the price tests 1.3365 twice in a row while the MACD indicator is oversold. This will limit the pair's downward potential and lead to an upward market reversal. An increase towards opposing levels of 1.3390 and 1.3425 can be anticipated.
Sell Scenarios
Scenario 1: I plan to sell the pound today after the 1.3365 level is updated (red line on the chart), which will trigger a rapid decline in the pair. The key target for sellers will be the 1.3328 level, where I plan to exit the short positions and open long positions in the opposite direction (expecting a move of 20-25 pips back from the level). Pressure on the pound may return if the data is weak. Important! Before selling, ensure the MACD indicator is below the zero mark and just beginning its decline.
Scenario 2: I also plan to sell the pound today if the price tests 1.3390 twice in a row while the MACD indicator is in the overbought area. This will limit the pair's upward potential and lead to a downward market reversal. A decrease towards opposing levels of 1.3365 and 1.3328 can be expected.
What's on the Chart:
- The thin green line represents the entry price at which you can buy the trading instrument;
- The thick green line is the assumed price where you can set Take Profit or manually take profit, as further growth above this level is unlikely;
- The thin red line indicates the entry price at which you can sell the trading instrument;
- The thick red line is the assumed price where you can set Take Profit or manually take profit, as further decline below this level is unlikely;
- The MACD indicator. When entering the market, it's important to refer to the overbought and oversold zones.
Important: Beginner traders in the forex market need to make entry decisions very carefully. It is best to stay out of the market before the release of important fundamental reports to avoid sharp fluctuations in prices. If you choose to trade during the release of news, always set Stop Loss orders to minimize losses. Without placing Stop Loss orders, you can quickly lose your entire deposit, especially if you do not use money management and trade large volumes.
And remember, successful trading requires a clear trading plan, like the one presented above. Making spontaneous trading decisions based on the current market situation is inherently a losing strategy for intraday traders.
