Trade Analysis and Tips for Trading the British Pound
The price test at 1.3453 coincided with the moment when the MACD indicator began to move downward from the zero mark, confirming the correct entry point for selling the pound, which led to the pair dropping to the target level of 1.3416.
Yesterday, during the European session, sterling showed some resilience, recovering positive signals from the British manufacturing front. The PMI index in the UK’s manufacturing sector, released earlier that day, exceeded expectations, indicating that activity in this key sector remains at a high level. This was good news for traders who feared a slowdown in the UK economy’s growth.
However, as is often the case in the currency market, the rally in the British currency was short-lived. In the second half of the day, macroeconomic news from across the Atlantic took center stage and significantly impacted the dynamics of the GBP/USD pair. A strong report on the U.S. manufacturing sector supported the dollar and undermined the positions of risk assets. The ISM Manufacturing PMI soared to 55.6 percent, adding 2.3 points to the June value and significantly exceeding market expectations. With the manufacturing sector expanding in July at the fastest rate in over four years, the data dispelled concerns about an economic slowdown and strengthened arguments for a hawkish Federal Reserve policy, bolstering the dollar. Against this backdrop, the British pound became dependent on external forces and conceded to the dollar.
Today, there are no significant fundamental data from the UK, so buyers of the pound may have a chance of a slight recovery in the pair. However, this chance is quite limited given the low likelihood of a significant rise. The market is likely to remain cautious, waiting for more substantial news.
Regarding the intraday strategy, I will rely more on scenarios No. 1 and No. 2.
Buy Scenarios
Scenario #1: Today, I plan to buy the pound upon reaching an entry point near 1.3438 (green line on the chart), with a target of 1.3462 (thicker green line on the chart). At 1.3462, I plan to exit my long position and sell in the opposite direction (expecting a move of 30-35 pips in the opposite direction from this level). Growth in the pound today can only be anticipated within the context of a correction. Important! Before buying, ensure that the MACD indicator is above the zero mark and is just starting to rise from there.
Scenario #2: I also plan to buy the pound today in the event of two consecutive tests of 1.3418 when the MACD indicator is in the oversold area. This will limit the pair’s downside potential and lead to an upward market reversal. Growth can be expected toward the opposite levels of 1.3438 and 1.3462.
Sell Scenarios
Scenario #1: I plan to sell the pound today after the 1.3418 level is updated (red line on the chart), which will trigger a swift drop in the pair. The key target for sellers will be 1.3394, where I plan to exit the sell and immediately buy in the opposite direction (expecting a move of 20-25 pips in the opposite direction from this level). Bad news will return pressure on the pound. Important! Before selling, ensure that the MACD indicator is below the zero mark and is just starting to decline from there.
Scenario #2: I also plan to sell the pound today in the event of two consecutive tests of 1.3438 when the MACD indicator is in the overbought area. This will limit the pair’s upward potential and lead to a downward market reversal. A decline can be expected toward the opposite levels of 1.3418 and 1.3394.
What the Chart Shows:
- Thin green line – entry price for buying the trading instrument;
- Thick green line – estimated price where take profit can be set, or profit can be realized, as further growth above this level is unlikely;
- Thin red line – entry price for selling the trading instrument;
- Thick red line – estimated price where take profit can be set, or profit can be realized, as further decline below this level is unlikely;
- MACD Indicator. When entering the market, it is important to be guided by overbought and oversold zones.
Important: Beginner forex traders need to make entry decisions very cautiously. Before key fundamental reports are released, it is best to stay out of the market to avoid sharp price fluctuations. If you decide to trade during news releases, always set stop orders to minimize losses. Without placing stop orders, you can quickly lose your entire deposit, especially if you do not practice money management and trade large volumes.
And remember, successful trading requires a clear trading plan, as outlined above. Making spontaneous trading decisions based on the current market situation is inherently a losing strategy for intraday traders.
