Analysis of trades and tips for trading GBP
The pair was trying to break through 1.3177 at the moment when the MACD indicator has already moved away from the zero level. It significantly limited the downward potential of the pair. This was the reason why I did not open short positions on the pound sterling. I was waiting for the implementation of scenario No. 2 for long trades. It was the right decision. Shortly after, the pair tested the 1.3177 level at the time when the MACD was in the oversold area. It was the perfect time for opening long trades. Unfortunately, there was no upward reversal. As a result, I had to close unprofitable positions. In the afternoon, a similar situation occurred at the level of 1.3205. When the pair was trying to break through that level for the first time, the MACD indicator moved away from the zero level. There were no purchases. Another test of the indicated level led to an increase in short positions. In that case, everything went smoothly. The drop was more than 40 pips, which helped traders offset the losses from the morning trades and make a profit. There were no other entry points.
Upbeat UK PMI Manufacturing and Services data fostered upward movement of the pound sterling. Both indexes showed a small decrease, which was positive given the market situation. However, the final data may turn out to be worse due to escalating geopolitical situation that is hurting the UK economy. In the second half of the day, the United States revealed the same indexes. Figures exceeded economists' forecasts. However, traders ignored this report. The US dollar failed to gain momentum after the release of macro reports, trading within the sideways channel. In the morning, traders were anticipating UK retail sales data, including the cost for automotive fuel. If the reading is negative, it will certainly limit the upward potential of the pound sterling. However, an increase in retail sales may also adversely affect the British currency. Rising retail sales will inevitably lead to a spike in inflation. The Bank of England is already extremely worried about inflation pressure. It has been trying to curb it since the end of last year. The economic calendar will be completely empty in the afternoon. Traders are likely to pay zero attention to the US pending home sales data. Therefore, news on the crisis in Ukraine will continue to remain in the limelight. Investors also monitor Fed policymaker's statements on future plans for monetary policy.
Buy signal
Scenario No. 1: it is recommended to buy the pound sterling today if the price reaches the entry point of 1.3225 (green line on the chart) with an upward target of 1.3263 (thicker green line on the chart). I would advise closing long positions and opening short ones at 1.3263, keeping in mind a 20-25 pip correction from the given level. The pound sterling may rise sharply in the first half of the day only if it breaks through the nearest resistance level of 1.3225. After that, the price needs to consolidate above this level. If so, there is a chance of a rapid increase. Important! Before opening long trades, make sure that the MACD indicator is above the zero mark and it has just started to rise from it.
Scenario No.2: it is also possible to buy the pound sterling today if the price approaches 1.3203. At this moment, the MACD indicator should be in the oversold area, which will limit the downward potential of the pair. It may also trigger an upward reversal. The pair is expected to jump to the opposite levels of 1.3225 and 1.3263.
Sell signal
Scenario No.1: it is recommended to open short positions on the pound sterling today only after the price hits the level of 1.3203 (the red line on the chart). It may lead to a rapid decline of the pair. The key target level will be 1.3157. I would advise closing short positions at this level and immediately opening long ones in the opposite direction, keeping in mind a 20-25 pip correction from the given level. Short positions are now more favorable as the economic prospects of the UK are becoming gloomier every day. Important! Before opening short positions, make sure that the MACD indicator is below the zero mark and it has just started to decline from it.
Scenario No.2: it is also possible to sell the pound today if the price reaches 1.3225. At this moment the MACD indicator should be in the overbought area, which will limit the upward potential of the pair. It may also trigger a downward reversal. The pair is excepted to drop to the opposite levels of 1.3203 and 1.3157.
Description of 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 close positions 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 close positions 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 I presented above. Spontaneous decisions based on the current state of the market are a losing strategy for an intraday trader.