Analysis of Trades and Trading Tips for the British Pound
The test of the 1.3342 level in the second half of the day occurred when the MACD indicator had already significantly moved above the zero line, which limited the pair's upward potential. A second test of this level followed shortly after, coinciding with the MACD declining from the overbought zone, which triggered scenario #2 for selling the pound and resulted in a drop of over 60 points.
The Bank of England's decision to cut interest rates the previous day failed to support the British pound, as the central bank adopted a cautious stance on the prospect of further monetary easing. However, pressure on the GBP/USD pair intensified in the second half of the day after signing a trade agreement between the UK and the US. Hints from Trump about potential similar deals with China and Europe led to a strengthening of the US dollar, once again weighing on the pound, which was already struggling to maintain its position after the Bank of England's decision.
Today, new speeches are expected from BoE Governor Andrew Bailey and MPC member Huw Pill. The tone of their remarks could offer some support to the pound, but it is unlikely to be long-lasting. The rhetoric will likely be cautious and balanced, reflecting the UK's complex economic environment. Market expectations for further monetary easing are unlikely to be fully refuted, but no strong commitment to further rate cuts is expected either.
In such a scenario, the pound could receive a short-term boost if Bailey and Pill emphasize positive aspects of the economy, such as easing inflation or a resilient labor market. However, fundamental issues like low productivity and high debt levels continue to pressure the British currency. Therefore, even if the BoE's tone is optimistic, a long-term uptrend for the pound remains unlikely.
For the intraday strategy, I will mainly rely on implementing scenarios #1 and #2.
Buy Scenario
Scenario #1: I plan to buy the pound today upon reaching the entry point around 1.3255 (green line on the chart), targeting a rise to the 1.3307 level (thicker green line). At 1.3307, I plan to exit long positions and immediately open short positions in the opposite direction, targeting a 30–35 pip move from the entry point. A cautious stance from the BoE officials may justify a short-term rise in the pound.
Important: Before buying, ensure the MACD indicator is above the zero line and beginning to rise.
Scenario #2: I also plan to buy the pound today if there are two consecutive tests of the 1.3216 level while the MACD indicator is in the oversold zone. This would limit the pair's downside potential and lead to an upward reversal. A rise toward 1.3255 and 1.3307 can be expected.
Sell Scenario
Scenario #1: I plan to sell the pound today after a break below the 1.3216 level (red line on the chart), likely leading to a quick drop in the pair. The primary target for sellers will be the 1.3154 level, where I plan to exit the short trade and immediately open a long position in the opposite direction, aiming for a 20–25 pip rebound. Selling the pound is appropriate after a failed attempt to break above the daily high.
Important: Before selling, ensure the MACD indicator is below the zero line and starting to decline.
Scenario #2: I also plan to sell the pound today if the 1.3255 level is tested twice consecutively while the MACD indicator is in the overbought zone. This will limit the pair's upside potential and lead to a reversal downward. A drop toward 1.3216 and 1.3154 can be expected.
What's on the Chart:
- The thin green line represents the entry price where the trading instrument can be bought.
- The thick green line indicates the expected price level where a Take Profit order can be placed, or profits can be manually secured, as further price growth above this level is unlikely.
- The thin red line represents the entry price where the trading instrument can be sold.
- The thick red line indicates the expected price level where a Take Profit order can be placed, or profits can be manually secured, as further price decline below this level is unlikely.
- The MACD indicator should be used to assess overbought and oversold zones when entering the market.
Important Notes:
- Beginner Forex traders should exercise extreme caution when making market entry decisions. It is advisable to stay out of the market before the release of important fundamental reports to avoid exposure to sharp price fluctuations. If you choose to trade during news releases, always use stop-loss orders to minimize potential losses. Trading without stop-loss orders can quickly wipe out your entire deposit, especially if you neglect money management principles and trade with high volumes.
- Remember, successful trading requires a well-defined trading plan, similar to the one outlined above. Making impulsive trading decisions based on the current market situation is a losing strategy for intraday traders.
