Analysis of trades. How to trade GBP/USD
The price tested the level of 1.3495 when the MACD was in the oversold zone. So, scenario 2 unfolded. As a result, the pound retraced up by 20 pips. However, pressure on the pair increased when Russia declared war on Ukraine. Another test at 1.3495 was an unsuccessful one. The MACD just started to move down from the zero line, which confirmed the accuracy of the sell entry point. Eventually, the pair plunged by another 30 pips. Long positions at 1.3463 were unprofitable due to the bearish market.
The current rise in the pound is associated with the attractiveness of the price after yesterday's plunge. However, if the Russia-Ukraine conflict escalates and Russia tries to seize Kyiv, pressure on the instrument will increase. Therefore, you should be extremely cautious when trading at the current highs. The market will pay close attention to the US and its sanctions against Russia. Governor Bailey's speech, as well as the second Q4 GDP estimate in the US and weekly jobless claims, had no effect on the market. No important fundamentals are expected today. The market is unlikely to show any reaction to BoE Pill's speech. In the US, personal spending and personal income reports will be released. A sharp increase in spending could affect high inflation and make the Fed act more aggressively. The market is unlikely to react to the Michigan consumer sentiment index and inflation expectations statistics either.
Buy signal
Scenario 1: You could go long today if the price reaches 1.3449 (the green line on the chart) with the target at 1.3510 (the thick green line on the chart). You should take profit there and immediately sell the pound, allowing a 15-20 correction. The pound is highly unlikely to strengthen today due to high geopolitical risks. Important! Before buying the instrument, make sure the MACD is above zero and just starts moving up from this level.
Scenario 2: Likewise, long positions could be opened today if the quote touches 1.3389 when the MACD is in the oversold zone. This could limit the pair's downside potential and lead to an upward reversal in the market. The price may either go down to 1.3449 or up to 1.3510.
Sell signal
Scenario 1: You could go short today if the price hits 1.3389 (the red line on the chart), which may lead to a plunge. The key target is seen at 1.3314 where you should close short positions and immediately buy the pound, allowing a 15-20 pips correction. The armed conflict in Ukraine will increase pressure on risk assets. Important! Before selling the instrument, make sure the MACD is below zero and just starts to move down from this level.
Scenario 2: Likewise, short positions could be opened today if the price reaches 1.3525 when the MACD is in the overbought zone. This could limit the pair's upside potential and lead to a downward reversal in the market. The quote may either go down to 1.3495 or up to 1.346.
On the chart:
The thin green line indicates a buy entry point.
The thick green line is the estimated price where you should place a take-profit order or lock in profit manually since the quote is unlikely to grow above this level.
The thin red line indicates a sell entry point.
The thick red line is the estimated price where you should place a take-profit order or lock in profit manually since the quote is unlikely to fall below this level.
MACD. When entering the market, it is important to pay attention to the overbought and oversold zones.
Remember that novice forex traders should be very careful when deciding to enter the market. Before the release of important fundamentals, you should stay out of the market in order to avoid sharp fluctuations in the rate. If you decide to trade during news releases, make sure to always place a stop-loss order to minimize losses. Without it, you may quickly lose your entire deposit, especially if you do not use money management but trade large volumes.
Remember that in order to succeed in the market, you should have a clear trading plan, like the one presented above. Spontaneous decisions based on the current state of the market are a losing strategy for an intraday trader.