Trade Review and Tips for Trading the British Pound
The price test at 1.3313 occurred as the MACD indicator began moving down from the zero line, confirming a good entry point to sell the pound. As a result, the pair fell toward the target area of 1.3283.
The pound continued its active decline against the dollar yesterday, even though no UK data were released and the market still expects a Bank of England rate hike. Dollar buyers proved more eager: the sharp rise in US bond yields and a 96% probability of a December Federal Reserve hike look far more attractive to them than sterling's prospects.
Today, the pound will receive several important UK indicators in the first half of the day, and comparing them with past months helps explain a lot. Q3 GDP is forecast at 0.7% after 0.5% in the prior period, and year-on-year growth is expected at 1.9% versus 1.4%. That looks decent, but the monthly picture is much less optimistic. GDP rose 0.4% in July, slowed to 0.1% in August, and September is forecast to fall 0.1% — so momentum is weakening, and the quarterly result largely reflects what has already happened.
The industrial picture shows an even clearer reversal. In mid-October, the August data surprised to the upside: industrial production rose 0.8% vs an expected -0.1%, manufacturing added 1.2% after +0.3%, and the goods trade deficit narrowed to £18.0bn from £19.3bn. Sterling benefited from those figures then. Now forecasts point the other way: industrial production -0.3%, manufacturing -0.5%, and the goods deficit widening back to £19.2bn — meaning much of the August improvement may be unwound. Add the RICS house-price balance, which came out at -36% vs expected -33% and -32% previously, and the picture is more bearish.
This matters for the BoE because the rate is already at 4.00%, and Andrew Bailey on November 5 said a second hike is more likely than not; the market prices December roughly 50/50. Weak data will make that step less certain, while US yields and a 96% Fed-hike probability support the dollar. I believe that if weak forecasts are confirmed, pressure on the pound will return quickly, and traders should use that.
For intraday strategy, I will mainly rely on scenarios No. 1 and No. 2.
Scenarios to Buy
Scenario No. 1: I plan to buy the pound today when the entry point around 1.3267 (green line on the chart) is reached, targeting a rise to 1.3294 (thicker green line on the chart). Around 1.3294, I will exit long positions and open short positions in the opposite direction (expecting a 30–35 pip move in the opposite direction from the level). Expect the pound to rise today only after strong reports. Important! Before buying, make sure the MACD indicator is above the zero line and is just beginning to rise from it.
Scenario No. 2: I also plan to buy the pound today in the event of two consecutive tests of 1.3252 while the MACD indicator is in the oversold area. This will limit the pair's downside potential and lead to an upward reversal. You can expect a rise to the opposite levels of 1.3267 and 1.3294.
Scenarios to Sell
Scenario No. 1: I plan to sell the pound today after the 1.3252 level is breached (red line on the chart), which could lead to a rapid decline in the pair. The key target for sellers will be 1.3226, where I will exit shorts and immediately open longs in the opposite direction (expecting a 20–25 pip move away from the level). Bad news will restore pressure on the pound. Important! Before selling, make sure the MACD indicator is below the zero line and is just beginning to fall from it.
Scenario No. 2: I also plan to sell the pound today in the event of two consecutive tests of 1.3267 while the MACD indicator is in the overbought area. This will limit the pair's upside potential and lead to a downward reversal. You can expect a decline to the opposite levels of 1.3252 and 1.3226.
What's on the Chart:
Thin green line – the entry price at which you can buy the trading instrument;
Thick green line – the suggested price where you can place a Take Profit or manually lock in gains, since further upside above this level is unlikely;
Thin red line – the entry price at which you can sell the trading instrument;
Thick red line – the suggested price where you can place a Take Profit or manually lock in gains, since further downside below this level is unlikely;
MACD indicator. When entering the market, it is important to follow the overbought and oversold zones.
Important. Beginner Forex traders must be very cautious when making entry decisions. Before the release of important fundamental reports, it is best to stay out of the market 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 I presented above. Spontaneous trading decisions based on the current market situation are a losing strategy for an intraday trader from the start.
