Hourly chart of the GBP/USD pair
The GBP/USD pair continued its downward movement on Monday, January 11, which started last Friday. This movement ended near the lower border of the descending channel. Rebounding from it provoked the beginning of an upward correction. However, the sell signal that was created last Friday was canceled a little earlier after the MACD indicator turned to the upside (circled in red). Thus, those who were in short positions on Friday could end up earning around 80 points in profit. The sell signal from Friday is a classic strong signal that could and should have been worked out. First, the price has returned to the upper line of the descending channel and rebounded off it, which is always a good signal. Secondly, the MACD indicator turned down, having previously corrected, above the zero level. These are the kind of signals that we recommend you to look for and work out. At the moment, you need to wait for the current correction to end and a new sell signal to appear. In order to be able to buy the pound, you need to wait for the price to settle above the downward channel.
Fundamentally, everything remains unchanged for the British pound. The pound has slightly depreciated, but that's it, just a little. Prior to that, it has risen in price by 2100 points in nine months. Thus, so far we are only dealing with a correction, which, however, is supported by building a trend (channel). However, we cannot conclude that the pound fell due to the third wave of the COVID-19 epidemic or the third lockdown in the UK. Unfortunately, markets still do not take into account all this negative information.
Again, no major macroeconomic reports or other events scheduled for Tuesday, January 12, both in the UK and the US. There will only be general news on general topics like the coronavirus in the UK or the political crisis in the US. Thus, we can assume that the foundation will not affect the pair's movement tomorrow. Thus, it is possible to trade on pure technique, which is even good, since only one factor will need to be taken into account.
Possible scenarios for January 12:
1) Buy orders have lost their relevance, since a downward trend and a descending channel have both appeared. Thus, in order to be able to consider long positions, you should wait for the pair to settle above this channel. In this case, you can open long positions while aiming for 1.3677 and 1.3718 (to be revised in the morning). However, this scenario is not expected until Tuesday morning.
2) Sell positions are currently relevant. Novice traders can continue to trade bearish as the downward trend continues. For new shorts on the pair, you need to wait for the MACD indicator to discharge to the zero level as well as a new downward reversal. Targets - support levels 1.3481 and 1.3424. Rebounding from the 1.3541 level can also serve as a signal for new shorts on the pair.
On the chart:
Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.
Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.
The MACD indicator consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).
Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.
Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.