Analysis of Trades and Tips for Trading the British Pound
The price test at 1.3406 coincided with a moment when the MACD indicator was just beginning to move downward from the zero mark, confirming a correct entry point to sell the pound. As a result, the pair collapsed to the target level of 1.3348.
Yesterday's statement from the Federal Reserve marked not just a change in rhetoric but a fundamental shift in the long-awaited—and, as has now become clear, insufficient—policy for the current economic situation. While keeping the key interest rate at its previous level, the central bank clearly indicated its expectation of a series of rate hikes. This signal, interpreted by the markets as a call to action, immediately affected the currency market, strengthening the dollar against the pound.
Next is the Bank of England meeting. Currently, analysts lean towards the view that the central bank will likely prefer to keep the current rate unchanged. This conservative approach is driven by several factors, including economic uncertainty, domestic political struggles, high energy prices, and the situation in the Middle East. However, if an unexpected decision to lower rates is made, it will immediately impact the British pound, likely causing further weakening.
In addition to the rate decision, investors will pay close attention to the release of UK labor market data. Expected indicators regarding unemployment levels and changes in claims for unemployment benefits could serve as indicators of the state of the British economy. A high unemployment rate or an increase in claims would signal a slowdown in economic activity, which in turn would exert additional pressure on the pound.
As for the intraday strategy, I will primarily rely on the implementation of scenarios #1 and #2.
Buy Scenarios
Scenario #1: I plan to buy the pound today at an entry point around 1.3325 (green line on the chart), with a target of a rise to 1.3364 (thicker green line on the chart). At around 1.3364, I intend to exit my long positions and open short positions in the opposite direction (anticipating a movement of 30-35 pips in the opposite direction from the level). Expectations for the pound to rise today can be based on a potential interest rate increase by the Bank of England. Important! Before buying, ensure that the MACD indicator is above the zero mark and is just starting its upward movement from there.
Scenario #2: I also plan to buy the pound today in the event of two consecutive tests of 1.3295 while the MACD indicator is in the oversold area. This will limit the pair's downward potential and lead to an upward market reversal. Growth can be expected towards the opposite levels of 1.3325 and 1.3364.
Sell Scenarios
Scenario #1: I plan to sell the pound today after the price breaches 1.3295 (red line on the chart), which will trigger a rapid decline in the pair. The key target for sellers will be 1.3249, where I intend to exit the short position and immediately buy back in the opposite direction (anticipating a move of 20-25 pips in the opposite direction from the level). Poor data will increase pressure on the pound. Important! Before selling, ensure that the MACD indicator is below the zero mark and is just starting its downward movement from there.
Scenario #2: I also plan to sell the pound today in the event of two consecutive tests of 1.3325 while the MACD indicator is in the overbought area. This will limit the pair's upward potential and lead to a market reversal downwards. A decline can be expected towards the opposite levels of 1.3295 and 1.3249.
What's on the Chart:
Thin green line – entry price for buying the trading instrument;
Thick green line – presumed price level for placing Take Profit or manually securing profits, as further growth above this level is unlikely;
Thin red line – entry price for selling the trading instrument;
Thick red line – presumed price level for placing Take Profit or manually securing profits, as further decline below this level is unlikely;
MACD Indicator. When entering the market, it is important to consider the overbought and oversold zones.
Important: Beginner traders in the Forex market must be very cautious when making entry decisions. Before major fundamental reports are released, it is best to stay out of the market to avoid being caught in sharp fluctuations. If you decide to trade during news releases, always set stop orders to minimize losses. Without setting stop orders, you can quickly lose your entire deposit, especially if you are not using money management and are trading large volumes.
And remember, for successful trading, you need a clear trading plan similar to the one presented above. Making spontaneous trading decisions based on the current market situation is inherently a losing strategy for intraday traders.
