Trade Review and Tips for Trading the British Pound

The price test at 1.3528 occurred when the MACD indicator had already moved significantly above the zero line, which limited the pair's upward potential.

The pound rose fairly well on the back of a positive PMI manufacturing report, which came in above economists' forecasts. This unexpected positivity gave hope to investors weary of a string of gloomy economic news from the U.K. The optimism was reinforced by expectations that the Bank of England, considering recession risks, will continue to lower interest rates and ease monetary policy.

Today, we are expecting U.S. ISM data, though it might not have a major impact on the market. Only strong ISM data could become a real catastrophe for the pound. A stronger dollar, supported by optimism about the U.S. economy, would lead to a sharp drop in GBP/USD. In this case, investors should be ready for a breach of support levels and a potential reevaluation of trading strategies.

Speeches by Federal Reserve Chair Jerome Powell and FOMC member Lorie K. Logan will be key events today. Powell is expected to provide comments on inflation and the slowing economy. His hawkish tone would support the dollar. Logan is likely to emphasize the need for careful evaluation of incoming data before making further decisions on interest rates.

As for the intraday strategy, I will rely mainly on the implementation of Scenario #1 and Scenario #2.

Buy Signal

Scenario #1: Today, I plan to buy the pound at around 1.3555 (green line on the chart) with a target of rising to 1.3597 (thicker green line on the chart). I plan to exit at 1.3597 and then open sell positions in the opposite direction (expecting a 30–35 point move back from the entry). A rise in the pound today can be expected only after weak U.S. data. Important! Before buying, ensure the MACD indicator is above the zero line and just starting to rise.

Scenario #2: I also plan to buy the pound today if there are two consecutive tests of the 1.3509 price level, while the MACD indicator is in the oversold area. This will limit the pair's downward potential and could lead to a market reversal upward. Growth toward the 1.3555 and 1.3597 levels can be expected.

Sell Signal

Scenario #1: I plan to sell the pound after the 1.3509 level (red line on the chart) is broken, which will likely lead to a quick drop in the pair. The main target for sellers will be 1.3461, where I plan to exit sales and immediately open buy positions in the opposite direction (expecting a 20–25 point rebound). Sellers are unlikely to show significant strength today. Important! Before selling, ensure the MACD indicator is below the zero line and just starting to decline.

Scenario #2: I also plan to sell the pound today if there are two consecutive tests of 1.3555 when the MACD is in the overbought zone. This will limit the pair's upward potential and lead to a downward reversal. A decline toward the 1.3509 and 1.3461 levels can be expected.

Chart Key:

• Thin green line: Entry price to buy the trading instrument.
• Thick green line: Target price for setting Take Profit or manually closing the position, as further growth beyond this level is unlikely.
• Thin red line: Entry price to sell the trading instrument.
• Thick red line: Target price for setting Take Profit or manually closing the position, as further declines beyond this level are unlikely.
• MACD Indicator: When entering the market, it's important to monitor overbought and oversold zones.

Important: Beginner traders in the Forex market must be extremely cautious when deciding to enter the market. It is best to stay out of the market before major fundamental reports to avoid sharp price swings. If you decide to trade during news releases, always set stop-loss orders to minimize losses. Without stop-losses, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember, successful trading requires having a clear trading plan, similar to the one presented above. Making spontaneous trading decisions based on current market conditions is initially a losing strategy for intraday traders.