Trade review and tips for trading the British pound
The test of the price 1.3382 came at a time when the MACD indicator had moved far down from the zero mark, which limited the pair's downside potential. A second test of 1.3382 led to the implementation of Scenario No. 2 for buying the pound, resulting in a 20-pip rise.
UK inflation did its work yesterday. The annual consumer price index stood at 3.5% versus a 3.4% forecast and 3.1% in August; the monthly figure was 0.4% versus a 0.3% forecast (0.5% a month earlier). Core inflation gave an even stronger signal, rising to 2.8% versus a 2.7% forecast and 2.6% previously. Strong US reports could have helped sellers, but no US data were released in the afternoon, and there was no reason to sell the pound against the dollar. In my view, while rate expectations persist, the pound will hold, and only data that make the Bank of England doubt the need for tightening can cool it.
Today the pound will focus on two events. First, the Confederation of British Industry's industrial-orders balance, forecast to worsen to -20 from -9 a month earlier. Second, Bank of England Governor Andrew Bailey will speak. Bailey's remarks yesterday did not move GBP/USD, and I do not expect a different outcome today. Recall that Megan Greene urged a rate hike at the November 5 meeting earlier this week. If Bailey gives no hint of a hawkish turn and industrial orders print near forecasts, the pound is unlikely to leave the current range.
For the intraday strategy, I will rely more on Scenarios No. 1 and No. 2.
Scenarios for Buying
Scenario No. 1: I plan to buy the pound today when it reaches an entry point around 1.3402 (green line on the chart) with a target of rising to 1.3420 (the thicker green line on the chart). Around 1.3420, I intend to exit long positions and open short positions in the opposite direction (expecting a 30–35-pip move away from the level). You can count on the pound to rise today after strong data. Important! Before buying, make sure the MACD indicator is above the zero mark and is only beginning to rise from it.
Scenario No. 2: I also plan to buy the pound today in the event of two consecutive tests of the price 1.3390 at a time when the MACD indicator is in the oversold area. This will limit the pair's downward potential and lead to an upward reversal. One can expect a rise to the opposite levels of 1.3402 and 1.3420.
Scenarios for Selling
Scenario No. 1: I plan to sell the pound today after the 1.3390 level is refreshed (red line on the chart), which will lead to a rapid decline in the pair. The sellers' key target is 1.3365, where I intend to exit shorts and immediately open longs in the opposite direction (expecting a 20–25-pip move away from the level). Bad news will return pressure on the pound. Important! Before selling, make sure the MACD indicator is below the zero mark and is only beginning to decline from it.
Scenario No. 2: I also plan to sell the pound today in the event of two consecutive tests of the price 1.3402 at a time when the MACD indicator is in the overbought area. This will limit the pair's upside potential and lead to a downward reversal. One can expect a decline to the opposite levels of 1.3390 and 1.3365.
What's on the chart:
Thin green line — entry price where you can buy the instrument.
Thick green line — approximate price where you can place Take Profit or manually lock in profits, because further upside above this level is unlikely.
Thin red line — entry price where you can sell the instrument.
Thick red line — approximate price where you can place Take Profit or manually lock in profits, because further downside below this level is unlikely.
MACD indicator. When entering the market, it's important to consider overbought and oversold zones.
Important. Novice Forex traders must be very cautious when deciding to enter the market. It is best to stay out before major fundamental reports to avoid getting caught in sharp price swings. If you decide to trade during news releases, always place stop orders to minimize losses. Without stop orders, you can quickly lose your entire deposit, especially if you don't use money management and trade large volumes.
Remember: successful trading requires a clear trading plan, like the example above. Spontaneous trade decisions based solely on the immediate market situation are, by definition, a losing strategy for an intraday trader.
